Insurance expert discusses fire coverage and what the Franklin Fire means to the insurance industry.

Published Date: 12/10/2024

Fire, Fair Plans, and Financial Stability: What the Franklin Fire Reveals About California’s Insurance Future

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 public anxiety about coverage, affordability, and the future of California’s fire insurance market.

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 industry. His insights offer a sobering look at the realities of living — and insuring — property in wildfire-prone regions.

1. Safety Comes First — Insurance Comes Second

Susman began with a reminder that in moments of crisis, safety must always come before property. It’s human nature to want to check on one’s home during an evacuation, but as he noted, “Do whatever you need to do first to be safe. Property is property.”

However, preparedness before disaster strikes is equally vital. Once a fire starts, insurers often freeze policy activity — meaning no changes can be made until the emergency ends. If you haven’t reviewed your coverage before evacuation orders are issued, it’s too late to adjust it mid-crisis.

Susman advises every homeowner to:

• Keep a digital copy (PDF) of your insurance policy.
• Have your insurer’s contact numbers readily available.
• Maintain an evacuation go-bag with essential documents and valuables.

In other words, preparation is the best insurance you can have.

2. Evacuation Coverage — The Overlooked Benefit

Many Californians don’t realize their homeowners insurance may include “loss of use” coverage, which pays for temporary living expenses if you’re forced to evacuate.

This can include:

• Hotel stays or temporary housing
• Meals
• Laundry or transportation costs

Susman encouraged policyholders under mandatory evacuation orders to check with their insurers immediately, as some companies will reimburse costs even if your home isn’t damaged — as long as access to it is restricted due to a covered peril.

“If there is an evacuation, check with your insurance company,” he advised. “Some policies will provide coverage for you if you do have to leave.”

For homeowners displaced by fires like the Franklin Fire, this can mean the difference between personal comfort and financial distress during an already stressful situation.

3. The California FAIR Plan: Last Resort or Lifeline?

As wildfires intensify, many major insurers have paused or limited new policies in California. For homeowners in fire-prone areas, that often leaves one option: the California FAIR Plan, a state-mandated “insurer of last resort.”

Susman explained that, in areas like Malibu, the FAIR Plan is now the de facto insurer for most properties — and that’s by design. It was created specifically to ensure that homeowners in high-risk regions still have access to fire coverage when private insurers won’t take on the exposure.

“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.”

That’s reassuring, but it comes with trade-offs. FAIR Plan policies are basic fire-only policies, meaning they don’t cover theft, liability, or water damage. To bridge those gaps, homeowners must purchase a Difference in Conditions (DIC) policy through a private carrier.

This layered approach can work well — but it’s more complex and often more expensive. Still, it’s a crucial lifeline in a shrinking marketplace.

4. Regulatory Reform Is Still the Key to Recovery

Even as wildfires increase in frequency and severity, Susman made it clear that the Franklin Fire alone won’t change industry behavior.

“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.”

In other words, the insurance crisis wasn’t created by one fire — and it won’t be fixed by one policy. What’s needed, Susman emphasized, are structural reforms to California’s regulatory framework, particularly under Proposition 103.

That 1988 law requires insurers to obtain state approval for rate changes, often based on historical rather than forward-looking data. This creates a mismatch between today’s wildfire risks and yesterday’s pricing models.

“If anything,” Susman said, “this fire gives us that much more necessity to have those changes done so we can continue to move forward.”

Reforms in progress — including new regulations on catastrophe modeling and reinsurance cost inclusion — could help insurers better price risk and return to the market. But those changes must move faster if the state hopes to avoid deeper market contraction.

5. Why the Franklin Fire Won’t Cause a Market Collapse

Despite public fears, Susman does not believe the Franklin Fire will trigger another mass exodus of insurers.

“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.”

In other words, insurers expect losses in certain regions. The real problem isn’t the fires themselves — it’s that insurers aren’t allowed to charge rates that match today’s risk. Until that changes, coverage will remain limited, but events like the Franklin Fire won’t cause sudden market shocks.

Still, as more properties migrate to the FAIR Plan, the state’s residual market grows — and with it, systemic financial risk. The FAIR Plan itself must now purchase vast amounts of reinsurance, the cost of which is skyrocketing worldwide. If left unchecked, those costs could eventually translate into higher assessments for all insurers — and, ultimately, all consumers.

6. What Homeowners Can Do Right Now

While state regulators and insurers work through long-term solutions, homeowners can take practical steps to protect themselves:

✅ Review your policy annually – Don’t wait for fire season. Check coverage limits, replacement costs, and exclusions.

✅ Bundle FAIR + DIC coverage – If you’re in a high-risk area, combine the FAIR Plan with a Difference in Conditions policy for broader protection.

✅ Update your home inventory – Take photos, save receipts, and store records in the cloud or offsite.

✅ Maintain defensible space – Trim vegetation, clean gutters, and use fire-resistant materials. Some insurers now offer premium discounts for mitigation.

✅ Ask your agent for evacuation coverage details – Know what your “loss of use” benefits include before disaster strikes.

✅ Stay informed about regulatory changes – New Department of Insurance rules in 2025 may expand options for homeowners in fire zones.

Preparation, documentation, and communication remain the three pillars of survival — both financially and physically — during California’s new era of mega-fires.

7. The Human Element: Calm in Crisis

Susman’s steady, pragmatic tone throughout the interview reflects the heart of his message:

“An ounce of prevention. Take the time, review your policy, talk to your agent or broker. Be sure you have the coverage you need.”

It’s simple advice that too many overlook until it’s too late. With wildfires now threatening coastal, suburban, and even urban neighborhoods, the concept of “low risk” in California is fading fast.

The Franklin Fire, like the Mountain Fire before it, is a reminder that wildfire risk is no longer isolated to rural canyons — it’s statewide.

8. A Cautious Optimism for the Future

Despite systemic challenges, Susman remains cautiously optimistic. The state’s insurance regulators, led by Commissioner Ricardo Lara, are actively working on reforms designed to stabilize the market and entice private carriers back. These include:

• Allowing forward-looking catastrophe modeling for rate filings.
• Permitting reinsurance cost recovery in rate-setting.
• Streamlining the rate approval timeline, which currently can take years.

If successful, these reforms could usher in a more sustainable, predictable market — one that balances affordability with solvency.

Until then, the FAIR Plan will continue to play a central role in safeguarding California homeowners from disaster.

Final Thoughts

The Franklin Fire won’t destroy California’s insurance market — but it underscores why reform is urgent. Each blaze reveals the same truth: our current system is reactive, not resilient.

As Karl Susman emphasized, preparedness — both personal and systemic — is key. Homeowners must stay proactive, regulators must modernize, and insurers must balance risk with responsibility.

Because in California, wildfire season isn’t coming — it’s already here, and it’s reshaping the future of insurance for everyone.