Navigating Insurance Challenges: California Market, Claims, and Cyber Insurance

Published Date: 07/09/2024

Navigating California’s Insurance Challenges: Deductibles, Bundling, and the Rise of Cyber Coverage

In today’s turbulent insurance market, especially in California, homeowners, business owners, and everyday drivers are feeling the strain. Premiums are rising, coverage options are shrinking, and even long-time policyholders are facing unexpected nonrenewals. Amid these challenges, many people are asking: How can I save money on insurance without exposing myself to unnecessary risk?

In a recent episode of Insurance Hour, industry expert Karl Susman tackled some of these complex issues — from how high deductibles really impact your premium to how bundling can still pay off, even when your insurer doesn’t want both your home and auto coverage. Along the way, he also touched on an increasingly relevant topic: cyber insurance — a new frontier of protection for businesses and individuals alike.

Here’s a breakdown of the episode’s key insights and what they mean for Californians navigating today’s difficult insurance landscape.

1. Can I Have a $500,000 Deductible — and Will It Save Me Money?

One listener kicked off the show with a provocative question:

“Can I have a $500,000 deductible? Will I save money?”

It’s a question more and more people are asking as premiums soar. The logic seems sound — if you take on more risk yourself, your insurer should charge you less. But Susman was quick to clarify that it’s not quite that simple.

“There’s an aspect of diminishing returns,” he explained. “At some point, the insurance carrier can’t keep reducing your premium just because you raise your deductible.”

In other words, while going from a $1,000 to a $2,000 deductible might produce a noticeable drop in your premium, increasing it from $10,000 to $50,000 might barely move the needle. Why? Because beyond a certain threshold, insurers can’t justify the lower premium based on the small amount of remaining exposure they still carry.

2. Understanding Diminishing Returns on Deductibles

The reason deductibles stop saving you money at a certain point has everything to do with statistical risk modeling.

Insurance companies calculate risk based on data — not emotion. They know, on average, how likely it is that a homeowner will file a claim in a given year and how much that claim will cost. If your deductible is already high enough that you’re unlikely to file small claims, you’ve already removed most of the “nuisance risk” from their balance sheet.

At that point, raising your deductible further doesn’t dramatically change the company’s financial exposure. The premium stabilizes, even if you double or triple your deductible.

“There’s a point where you’re going to reach a deductible where you won’t see a premium change at all,” Susman said. “You’ve basically reached the ceiling.”

He estimated that, for most standard homeowners or business policies, that plateau happens somewhere between $5,000 and $10,000. For large commercial policies or high-value properties, the ceiling could be higher, but it’s still finite.

3. The Ratio of Risk to Exposure

The other factor to consider is the size of what you’re insuring. A $10,000 deductible on a $300,000 home is very different from a $10,000 deductible on a $10 million commercial property.

“If you’re insuring something for a million dollars, a $50,000 deductible means one thing,” Susman explained. “If you’re insuring ten million, then a $100,000 deductible might make sense.”

The key is proportion. Your deductible should represent a meaningful but manageable amount of risk — enough to reduce small claims and lower costs, but not so high that you couldn’t afford to pay it if something catastrophic happened.

4. Bundling Still Works — Even When Companies Don’t Want Both Policies

Another listener wrote in with a familiar problem:

“My home insurance company is one company, and my auto has to be another because my kid’s driving record is terrible. How can I still get a discount for this?”

In the past, bundling — putting your home and auto insurance with the same carrier — was one of the easiest ways to save money. But in California’s increasingly fragmented insurance market, many companies have stopped writing certain lines altogether. You might find a carrier that’s willing to insure your home but refuses to take on your auto, or vice versa.

So, what happens to your “multi-policy” discount?

The In-House Discount Option

According to Susman, there’s still a way to capture at least part of the bundling benefit — it’s called an in-house discount.

“Some insurance carriers will give you a discount on the property insurance portion if the auto insurance is written through the same broker,” he explained. “That’s because they consider the agent having control over both policies.”

In this setup, the same agent or brokerage manages both your home and auto coverage, even if they’re with different carriers. This gives insurers a sense of relationship continuity — the idea that you’re less likely to switch or lapse, which makes you a more stable customer.

Not all carriers offer in-house discounts, but it’s worth asking your broker. This can be especially useful when your primary insurer doesn’t write auto insurance but still wants to reward you for keeping everything under one roof.

The Psychology Behind Bundling Discounts

Why do insurance companies offer bundling discounts in the first place? It’s not just about convenience — it’s about customer behavior.

“Statistically, the more policies you have with one company, the more likely you are to stay with that company,” Susman said. “And for some reason, the less likely you are to file a claim.”

That’s right — data shows that multi-policy customers not only stick around longer but also tend to be less risky. Insurers reward that loyalty with lower premiums. It’s not personal — it’s math.

5. The Rise of Cyber Insurance

While much of the conversation focused on traditional coverage, Susman also turned to an increasingly critical and often overlooked area: cyber insurance.

As more businesses — and even individuals — rely on digital systems, the risks associated with hacking, ransomware, and data breaches have exploded. Yet, most small business owners in California still don’t carry cyber coverage, often assuming they’re too small to be targeted.

That assumption, Susman warned, is dangerous.

“Hackers aren’t looking for size — they’re looking for vulnerability,” he said. “A lot of small businesses think, ‘We’re not big enough to be hacked,’ but that’s exactly why they’re targeted. They’re easier to breach.”

What Cyber Insurance Covers

Cyber insurance policies are designed to protect against a range of digital threats, including:

• Ransomware attacks — where hackers encrypt your systems and demand payment.
• Data breaches — including legal liability for exposed customer data.
• Business interruption — compensation for lost income while systems are offline.
• Cyber extortion — costs associated with negotiating or recovering from threats.
• Notification and recovery expenses — the cost of alerting customers, hiring forensic experts, and rebuilding trust.

As Susman noted, some business owners still believe they’re protected through their general liability policy — but in most cases, they’re not.

“Cyber events are specifically excluded from most general business policies,” he cautioned. “You need a separate cyber endorsement or standalone policy.”

The Cost of Cyber Coverage

The good news is that cyber insurance is still relatively affordable compared to the potential damage of a digital attack. Policies can start as low as a few hundred dollars per year for small businesses, depending on the size, industry, and amount of sensitive data handled.

However, as attacks become more common, underwriting standards are tightening. Carriers now expect policyholders to maintain basic cyber hygiene — such as multi-factor authentication, data backups, and employee training — before offering full coverage.

“It’s not just about buying the policy,” Susman said. “It’s about proving that you’re a responsible digital citizen.”

6. Dogs, Homeowners, and the Reality of Breed Restrictions

Earlier in the episode, Susman addressed a surprising but increasingly relevant question from a listener who was denied homeowners coverage because of their dog’s breed.

“Yes, currently an insurance company can refuse coverage based on the breed of dog you have,” he confirmed.

Certain breeds — including pit bulls, rottweilers, and dobermans — are statistically linked to higher liability claim rates, even if your individual pet is perfectly gentle. However, there are workarounds, including specialty carriers and excess-line policies that don’t discriminate by breed.

Some lawmakers and consumer groups are pushing for reform, arguing that breed-based underwriting is outdated and unfair. For now, though, it remains legal and common in most states, including California.

7. The Bigger Picture: A Changing Market

As Susman reminded listeners throughout the episode, today’s insurance challenges — from soaring premiums to restricted coverage — are part of a larger market shift driven by:

• Climate-related disasters like wildfires and floods.
• Inflation and construction costs affecting claim payouts.
• Regulatory pressure limiting how insurers can price risk.
• Financial downgrades that make carriers more conservative.

These forces have created a feedback loop of risk, regulation, and restriction — one that both consumers and agents must learn to navigate together.

Final Thoughts: Smart Risk Management in Uncertain Times

If there’s a recurring theme in Susman’s insights, it’s this: insurance is a balance between protection and practicality.

You can’t eliminate risk — but you can manage it intelligently.
You can’t always lower premiums — but you can understand what drives them.

Whether you’re debating a higher deductible, exploring cyber coverage, or simply trying to make sense of California’s chaotic market, knowledge is your best defense.

“Insurance isn’t about fear,” Susman concluded. “It’s about being prepared. Once you understand how the pieces fit together — risk, price, and protection — it stops being confusing and starts being empowering.”