Karl Susman Discusses California Wildfires, Insurance Challenges, and Recovery
Published Date: 01/12/2025
California’s wildfires are no longer seasonal anomalies — they are structural stress tests for one of the nation’s most complex insurance ecosystems. Every year, as flames rage through forests and communities, they leave behind not only destruction but also deep uncertainty about who will pay to rebuild.
In a recent Insurance Hour segment, insurance expert Karl Susman dissected this crisis with clarity and urgency, explaining how the state’s insurance system, government programs, and new regulatory changes are reshaping the path to recovery. His insights highlight both the peril and promise facing California’s insurance market — and what homeowners can do to stay protected in an era of rising natural disaster risk.
1. The Wildfire Crisis: A Test of Resilience and Regulation
California is once again confronting the devastating aftermath of widespread wildfires — blazes that have destroyed thousands of structures, displaced tens of thousands of residents, and strained an already fragile insurance system.
Susman underscored a critical point: these fires are not isolated events, but indicators of a structural imbalance between climate realities, insurance regulation, and market capacity.
“We’re seeing more intensity, longer fire seasons, and higher rebuild costs,” Susman noted. “It’s not just about what’s burning — it’s about how the system responds afterward.”
That “system” includes private insurance carriers, the California FAIR Plan (the state’s insurer of last resort), federal agencies such as FEMA, and state-led reforms aimed at restoring market stability. Understanding how each piece fits together is essential for homeowners navigating post-disaster recovery.
2. The FAIR Plan: California’s Last Line of Defense
When major insurers like State Farm, Allstate, and Farmers pull back from wildfire-prone regions, the California FAIR Plan becomes the fallback for many homeowners.
But as Susman explained, the FAIR Plan is often misunderstood — both in how it operates and how it’s funded.
“A lot of people think the FAIR Plan is a government bailout or taxpayer-funded program. It’s not,” Susman emphasized. “It’s a privately funded pool created by law, and every admitted carrier in California participates in it.”
In essence, the FAIR Plan acts as a shared insurance consortium, spreading wildfire risk among all admitted insurers in the state. Each company contributes based on its market share. This structure ensures that no single carrier bears the full weight of catastrophic losses.
However, the FAIR Plan is not designed for long-term use. It provides basic fire coverage only, not comprehensive homeowners insurance. Policyholders often need to purchase a Difference in Conditions (DIC) policy to add protection for liability, theft, or water damage.
“The FAIR Plan is the safety net — not the mattress,” Susman said. “It’s meant to catch you temporarily, not carry you forever.”
With the FAIR Plan now exceeding 350,000 policies statewide — triple the volume from just a few years ago — questions about its financial resilience are growing louder. Nonetheless, Susman reaffirmed that the Plan remains actuarially sound, supported by robust reinsurance layers and backstopped by the collective strength of California’s admitted insurers.
3. State Farm’s Non-Renewals and Market Fallout
Few developments have captured as much attention as State Farm’s massive policy non-renewals. The company announced it would discontinue coverage for tens of thousands of homeowners across California, citing unmanageable wildfire exposure, soaring reinsurance costs, and the constraints of Proposition 103 — the 1988 law limiting rate adjustments without state approval.
Susman explained that while these non-renewals are devastating for affected homeowners, they reflect a larger regulatory problem rather than company greed.
“The rate approval process in California hasn’t kept up with the real cost of risk,” he said. “When carriers can’t price policies accurately, they eventually stop writing them.”
This reality has left many homeowners scrambling for alternatives — often turning to the FAIR Plan or surplus lines carriers, which are not subject to the same regulatory caps. The result? A fragmented market where affordability and availability are increasingly out of sync.
Still, there’s cautious optimism. The Sustainable Insurance Strategy, introduced by the California Department of Insurance in late 2024, aims to restore balance by allowing modern catastrophe modeling and faster rate filings.
“For the first time in decades, carriers will be able to use forward-looking data — not just 20-year-old loss history,” Susman said. “That’s the foundation for rebuilding a functioning market.”
4. FEMA, SBA, and the Reality of Post-Fire Assistance
When wildfires strike, FEMA and the Small Business Administration (SBA) often step in to provide temporary housing, repair grants, and low-interest loans. But as Susman cautioned, these are not replacements for insurance.
“FEMA doesn’t make you whole,” he explained. “They’re there to get you safe, not to rebuild your dream home.”
Typically, FEMA grants max out around $42,000, far below the average cost to rebuild a California home — which now exceeds $500,000 in many counties. The SBA, meanwhile, can offer disaster loans, but they must be repaid, often with significant interest.
This is why adequate homeowners insurance and loss assessment coverage remain the most reliable defenses against financial ruin after a wildfire.
Susman urged homeowners to review policy limits annually, ensuring they reflect the current cost of labor, materials, and code upgrades — all of which have surged amid supply chain pressures and inflation.
5. Recovery and Reconstruction: Navigating the Insurance Maze
For homeowners whose properties are damaged or destroyed, the claims process can feel as overwhelming as the disaster itself.
Susman outlined several critical steps for navigating this phase effectively:
- File your claim immediately — even if you don’t know the full extent of damage. This locks in your claim date and triggers temporary housing benefits.
- Document everything. Take photos, videos, and keep a written inventory of all possessions.
- Track additional living expenses (ALE). Meals, hotel stays, and extra transportation costs are often reimbursable.
- Work with licensed contractors only. Verify credentials through the California Contractors State License Board (CSLB) to avoid scams.
- Stay patient and persistent. Wildfire claims can take months to settle, especially in high-volume disaster areas.
“This is why working with an experienced broker matters,” Susman noted. “They’re your advocate — someone who can speak the insurer’s language and make sure your claim doesn’t get lost in the shuffle.”
6. The Hidden Threat: Post-Disaster Scams and Price Gouging
Disaster recovery often brings out the best in communities — but it can also attract predatory actors.
Susman warned homeowners to watch for rental scams, contractor fraud, and illegal price gouging, particularly in counties under official disaster declarations.
“Some landlords are telling evacuees, ‘Give us your best and final offer.’ That’s not just unethical — it’s illegal under California Penal Code 396,” he emphasized.
That law limits rent increases to no more than 10% above pre-disaster levels, and violations can result in hefty fines or criminal charges.
Similarly, contractors who demand large cash deposits or unsolicited “expedited rebuilds” should be treated with suspicion.
“In times like these, stress and urgency make people vulnerable,” Susman said. “If someone pressures you to sign immediately, that’s a red flag.”
7. Building a Sustainable Future: The Insurance Reform Road Ahead
Despite the current turmoil, Susman expressed cautious optimism about California’s path forward. The new regulatory framework, he said, could finally align insurance pricing with actual risk — a crucial step toward restoring long-term market stability.
This includes:
- Allowing insurers to use catastrophe modeling to project future wildfire risk.
- Requiring them to write policies in both low- and high-risk areas.
- Incentivizing homeowners to adopt fire-mitigation measures such as ember-resistant vents, Class A roofs, and defensible space.
“We can’t eliminate fire risk,” Susman said, “but we can manage it smarter — through better construction, better modeling, and better collaboration between insurers, regulators, and homeowners.”
8. Takeaways: Protecting Yourself in a Changing Landscape
The wildfires may be a force of nature, but the insurance crisis is a man-made challenge — one shaped by policy, data, and collective decision-making.
Homeowners can take proactive steps today to reduce both personal and systemic vulnerability:
- Review and update your coverage annually.
- Bundle FAIR Plan policies with DIC coverage for full protection.
- Ask your insurer about mitigation discounts tied to “Safer from Wildfires” standards.
- Keep a digital copy of all insurance documents and home inventories.
- Follow updates from the California Department of Insurance for regulatory changes affecting renewal rights and coverage options.
“Insurance isn’t just about writing a check after disaster,” Susman concluded. “It’s about understanding risk — and managing it intelligently before disaster strikes.”
Conclusion: Resilience Starts with Awareness
California’s wildfires are testing the limits of the state’s insurance framework, but they are also driving overdue reform. As the FAIR Plan expands, FEMA aid flows, and private carriers recalibrate, the system is evolving — painfully but purposefully — toward sustainability.
For homeowners, the message is clear: education is empowerment. By understanding how coverage works, how policies interact, and how new laws are changing the landscape, Californians can rebuild not just homes, but confidence — one policy at a time.
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