How the Mountain Fire Exposed California’s Insurance Crisis

Published Date: 11/13/2024

When the Mountain Fire tore through Ventura County, it took only minutes to erase entire neighborhoods. Families who had lived in their homes for decades were left standing in ashes, searching for remnants of their lives — jewelry melted to silver dust, family photos reduced to charcoal, heirlooms lost forever.



Among the victims were sisters Kim and Lynette Wynn, who lost their Camarillo home in just 12 minutes. “I’m the sibling that keeps all the memories,” Kim said. “All the heirlooms from my great-grandparents — everything’s gone.”

Their loss reflects the experience of thousands of Californians who have watched wildfires consume not only their property, but their sense of security. While some families rebuilt with the help of homeowners insurance, others faced a devastating reality: their policies had been canceled just days before the fire.

“I feel for those folks,” one survivor said. “How are they going to rebuild? We’re talking hundreds of thousands — millions.”

In a recent appearance on Insurance Hour on FOX’s On Your Side, insurance expert Karl Susman explained why this is happening — and why more homeowners are being forced onto California’s FAIR Plan, the state’s insurer of last resort.

When Coverage Vanishes Before Disaster Strikes

For many residents, the tragedy of the Mountain Fire began not with flames, but with a non-renewal notice in the mail.

“We’re hearing from homeowners who lost their coverage just days before the fire,” Susman said. “That’s becoming far too common.”

Major insurers including State Farm, Allstate, and Farmers have severely limited new policies or non-renewed existing customers in high-risk wildfire areas. The financial math no longer works. Between inflation, surging construction costs, and repeated wildfire losses, insurers are paying out more than they collect in premiums. California’s strict rate regulations under Proposition 103 prevent carriers from adjusting prices quickly to match today’s risks.

“This is the perfect storm,” Susman explained. “Carriers have been afraid of exactly this — fire after fire after fire — and we’re living it right now.”

Two Homeowners, Two Very Different Outcomes

While the Wynns lost everything, other homeowners were able to rebuild because their insurance remained intact.

Lori Brennan rebuilt her Malibu home in just 14 months after losing it in the Woolsey Fire.

“The insurance company didn’t fight me,” she said. “They literally paid everything in full.”

Her experience shows how insurance is supposed to work: funds managed through escrow, inspections to ensure proper rebuilding, and full financial recovery. But it also highlights the widening divide between homeowners who still qualify for private insurance and those who no longer do.

What the California FAIR Plan Really Is

When private insurers stop writing coverage, homeowners turn to the California FAIR Plan.

Created in 1968 after urban riots and widespread fire losses, the FAIR Plan (Fair Access to Insurance Requirements) is a mandatory pool funded by every admitted insurer operating in California. It provides basic fire insurance when the private market will not.

“The FAIR Plan was designed for exactly this situation,” Susman explained. “When you can’t get coverage in the private market, it gives you basic fire insurance.”

However, it is not a full homeowners policy. The FAIR Plan covers only fire and smoke damage. It does not include liability, theft, water damage, or loss of use. To achieve full protection, homeowners must also purchase a Difference in Conditions (DIC) policy from a private carrier.

In practical terms:

• FAIR Plan = Fire only
• DIC Policy = Additional perils and liability
  Together, they can approximate traditional homeowners insurance — often at a much higher combined cost.

The FAIR Plan’s Rapid Growth and Rising Risk

The FAIR Plan was never meant to insure hundreds of thousands of homes. Yet it now covers more than 350,000 properties statewide, representing billions in exposure.

“People think of it as government insurance,” Susman said, “but it’s actually run by the industry itself.”

Every private insurer in California is required to fund the FAIR Plan based on market share. If a future disaster overwhelms its reserves, insurers can be assessed additional costs — which can ultimately flow back to policyholders statewide.

Why Homeowners Are Being Non-Renewed

Insurers evaluate wildfire risk based on multiple factors: location, slope, vegetation, wind exposure, and proximity to fire services. Once a property’s wildfire score crosses certain thresholds, carriers may non-renew regardless of individual mitigation efforts.

“That’s what frustrates people,” Susman said. “You can harden your home, clear brush, install sprinklers — and still lose coverage just because of your ZIP code.”

California’s Safer from Wildfires initiative requires insurers to offer discounts for certain mitigation steps. But implementation has been uneven, and many homeowners have not yet seen meaningful relief.

The Emotional and Financial Toll of Rebuilding

For homeowners who are insured, rebuilding is still slow and emotionally exhausting. Insurance payments are often issued to mortgage lenders, held in escrow, and released only after inspections.

“When you have a mortgage,” Brennan explained, “the insurance company sends the payment to your lender. The bank releases funds as work is verified.”

For those without insurance, recovery is far more difficult. FEMA grants and disaster assistance rarely come close to full replacement costs. Many families face years of financial instability after losing their homes.

What Homeowners Can Do Right Now

Despite the volatility, Susman offered practical steps for homeowners in wildfire-prone areas:

• Review coverage annually to ensure dwelling limits reflect current rebuilding costs.
• Document all fire-mitigation work, including defensible space and fire-resistant upgrades.
• Use a FAIR Plan and DIC combination if private insurance is unavailable.
• Never allow a lapse in coverage. Reinstatement in high-risk areas is extremely difficult.
• Work with an independent agent who can access multiple carriers and surplus lines markets.

Outdated Regulation and the Push for Reform

California’s insurance framework still operates under Proposition 103, passed in 1988. While it successfully limited excessive rate increases for decades, it also restricted insurers’ ability to respond to fast-evolving climate risk.

“We’re operating under a 1980s framework in a 2025 climate,” Susman said. “It’s time to modernize how we price and regulate risk.”

Reforms under Insurance Commissioner Ricardo Lara’s Sustainable Insurance Strategy aim to modernize risk modeling, allow greater pricing flexibility, and require insurers to recognize mitigation efforts.

Lessons from the Mountain Fire’s Devastation

The Mountain Fire is a reminder that California’s insurance crisis is not just economic — it is deeply human. For every statistic, there is a family trying to rebuild a life from ashes.

The FAIR Plan, imperfect as it is, remains a lifeline for those abandoned by the private market. It reflects both the resilience of the insurance system and the strain it is under.

“Insurance is what allows communities to rebuild,” Susman said. “Without it, recovery stops.”

Looking Ahead for California Homeowners

As California braces for future fire seasons, the lessons of the Mountain Fire are clear. Homeowners must take personal protective steps, but long-term stability depends on systemic reform.

Home hardening, defensible space, and careful coverage reviews are essential. But without modernization that allows insurers to price risk accurately while remaining accountable to consumers, dependence on the FAIR Plan will continue to grow.

Even amid ashes, rebuilding is possible. At its best, insurance is not just about money — it is about restoring stability, dignity, and hope to families who have lost everything.