What the Franklin Fire Reveals About California Insurance
Published Date: 12/10/2024
Wildfires have become an annual headline in California — and with each major blaze, homeowners, insurers, and policymakers are reminded just how fragile the state’s insurance ecosystem has become. The Franklin Fire, which recently threatened hundreds of homes in Malibu, has once again ignited anxiety about coverage, affordability, and the future of fire insurance in the state.
In a recent On Your Side interview, insurance expert Karl Susman joined journalist Christine Lazar to unpack what this fire means for homeowners and the broader insurance market. His insights offer a clear-eyed look at the realities of living — and insuring — property in wildfire-prone regions.
Safety and Preparedness Always Come First
Susman began with a straightforward reminder: personal safety must come before property protection. During evacuations, it’s natural to worry about your home, but the priority must always be getting out safely.
Once a fire emergency begins, insurers typically freeze policy activity. That means no changes to coverage can be made after evacuation orders are issued. If your policy hasn’t been reviewed beforehand, it’s too late to adjust it during the crisis.
Susman advises every homeowner to prepare in advance by keeping a digital copy of their insurance policy, storing insurer contact information in their phone, and maintaining an evacuation go-bag with essential documents and valuables. Preparation before fire season begins is the most reliable form of protection.
Evacuation and Loss of Use Coverage Many Homeowners Miss
One of the most overlooked benefits in a homeowners policy is “loss of use” coverage, which may pay for temporary living expenses if you are forced to evacuate.
This coverage can include hotel stays or temporary housing, meals, laundry, and certain transportation costs. Even if a home is not physically damaged, some policies reimburse expenses when access to the home is restricted under mandatory evacuation orders tied to a covered peril.
“If there is an evacuation, check with your insurance company,” Susman advised. “Some policies will provide coverage for you if you do have to leave.”
For families displaced by fires like the Franklin Fire, this benefit can significantly reduce the financial strain of sudden displacement.
The California FAIR Plan as a Critical Backstop
As wildfire risk intensifies, many major insurers have paused or sharply limited new policies in large parts of California. For homeowners in fire-prone areas such as Malibu, the California FAIR Plan has become the primary option for coverage.
The FAIR Plan is the state-mandated insurer of last resort, created to ensure that homeowners in high-risk regions still have access to basic fire insurance when the private market will not insure them.
“Fortunately, the California FAIR Plan is solvent,” Susman noted. “There’s no concern that they won’t be able to pay claims that might result from this.”
However, FAIR Plan policies provide fire-only coverage. They do not cover theft, liability, water damage, or many other common losses. To achieve full protection, homeowners typically pair a FAIR Plan policy with a Difference in Conditions (DIC) policy through a private insurer. This layered structure restores most of the protections found in a traditional homeowners policy but is more complex and often more expensive.
Why Regulatory Reform Remains the Real Solution
Susman emphasized that the Franklin Fire itself will not change insurer behavior. Fires in historically high-risk areas are no longer considered unexpected, and the industry already anticipates losses in these locations.
“This fire is not what’s considered an unexpected event,” he said. “The industry knows there are areas with an expectation of losses — and that’s what the FAIR Plan is for.”
The deeper issue is regulatory structure, particularly under Proposition 103, which requires insurers to obtain state approval for rate changes based largely on historical data rather than forward-looking risk. As wildfire patterns accelerate and expand, that system struggles to keep up with modern exposure.
“If anything,” Susman added, “this fire gives us that much more necessity to have those changes done so we can continue to move forward.”
Proposed reforms, including the use of catastrophe modeling and the ability to reflect reinsurance costs in rates, could help insurers better align pricing with real risk and potentially return to the California market.
Why the Franklin Fire Is Unlikely to Trigger Market Collapse
Despite understandable concern, Susman does not believe the Franklin Fire will directly cause another wave of insurer withdrawals.
“This is the fourth time this area has burned in the last 20 years,” he noted. “The industry knows it — and they price for that.”
Insurers expect losses in specific wildfire corridors. The primary problem is not the existence of fire risk itself, but the inability under current regulations to charge rates that accurately reflect that risk. Until pricing rules change, coverage options will remain constrained — but individual fires alone are unlikely to trigger sudden market collapse.
What is growing, however, is reliance on the FAIR Plan. As more properties shift into the residual market, systemic financial exposure increases. The FAIR Plan also must purchase large amounts of reinsurance, and global reinsurance costs are rising rapidly. Over time, these pressures could influence assessments across the broader insurance system.
Practical Steps Homeowners Should Take Now
While regulators and insurers work toward long-term stability, homeowners can take immediate action to strengthen their position:
- Review your policy annually to confirm coverage limits, replacement costs, and exclusions
- Combine FAIR Plan and DIC coverage if private insurance is unavailable
- Update your home inventory with photos, receipts, and cloud-based storage
- Maintain defensible space and fire-hardening features such as trimmed vegetation and clean gutters
- Ask your agent to explain evacuation and loss-of-use benefits in writing
- Stay informed about 2025 Department of Insurance rule changes that may expand future options
Preparation, documentation, and communication remain the most effective tools for protecting both property and finances during wildfire season.
The Human Side of Fire and Insurance Decisions
Throughout the interview, Susman returned repeatedly to the importance of calm preparation and informed decision-making.
“An ounce of prevention,” he said. “Take the time, review your policy, talk to your agent or broker. Be sure you have the coverage you need.”
With wildfires now threatening coastal, suburban, and urban communities alike, the concept of “low risk” in California is rapidly disappearing. The Franklin Fire reinforces that wildfire exposure is no longer isolated to remote canyons — it is a statewide reality.
A Cautious Optimism for California’s Insurance Future
Despite market strain, Susman remains cautiously optimistic. Under Commissioner Ricardo Lara, the Department of Insurance is pursuing reforms designed to stabilize the market and encourage private carriers to return. These include allowing forward-looking catastrophe modeling, permitting reinsurance cost recovery, and streamlining the rate approval process.
If successful, these reforms could help rebuild a more sustainable market that balances affordability with insurer solvency. Until then, the FAIR Plan will remain a central safety net for homeowners in fire-prone regions.
Final Thoughts on the Franklin Fire and Insurance Readiness
The Franklin Fire will not by itself destroy California’s insurance market — but it clearly underscores why reform is urgent. Each major blaze exposes the same weaknesses in a system that remains largely reactive rather than resilient.
As Susman emphasized, readiness on both personal and systemic levels is essential. Homeowners must stay proactive, regulators must modernize, and insurers must balance financial sustainability with consumer access.
In California, wildfire season is no longer a future threat — it is a constant reality, and it is reshaping the future of insurance for everyone.
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