(Part 1 of 6) Mastering California Insurance: Insights, Tips & Listener Q&A

Published Date: 07/02/2024

California’s Insurance Market in 2025: Fire Maps, Ordinance & Law Coverage, and What’s Next for Homeowners

If you’re a California homeowner, you’ve likely noticed your insurance costs rising, your options shrinking, and your patience wearing thin. Between wildfire exposure, regulatory hurdles, and major insurers cutting back, the state’s property insurance landscape is in turmoil.

In this episode of Insurance Hour, host and insurance expert Karl Susman tackled a flood of listener questions — from fire map confusion to coverage terms that many policyholders misunderstand.

Here’s what you need to know about the state of California’s insurance market in 2025 — and what the coming regulatory reforms could mean for you.

1. “Is USAA Dropping Insurance in California?”

This was the first question from a listener — and it’s one many Californians are asking about nearly every major insurer.

Susman’s answer was candid: while USAA hasn’t officially withdrawn from the market, no carrier is writing business the way they used to.

“I don’t believe there is a carrier that is not either restricting the business that they’re writing or non-renewing some level of policies,” Susman explained. “They’re all being very particular about conditions — looking at your home, your exposures, and your risk.”

In short: insurers are being more selective than ever.

Carriers are using this moment of market disruption to “clean their books” — trimming policies that they may have once accepted but now consider marginal.

If your property has older wiring, outdated roofing, or sits within a wildfire-prone ZIP code, it’s at risk of being dropped or non-renewed.

The good news?

Susman emphasized that California may finally be at “the tail end” of the crisis.

“We should be seeing the new regulations coming out literally any day,” he said. “And we should start to see some changes after that.”

Those changes refer to reforms under the Sustainable Insurance Strategy, an overhaul of how insurers assess risk and file rates in the state.

2. “Who Is Challenging the Fire Maps?”

Next, a listener asked a question that cuts to the heart of the state’s insurance crisis:

“Who is challenging the insurance fire maps to ensure that they make sense and pricing is rational based on them?”

Susman explained that there is no single fire map — and that’s where much of the confusion begins.

“Fire maps are a little bit misunderstood,” he said. “There is no specific fire map that everyone goes by — not the Department of Insurance, not the insurance companies.”

Instead, there are multiple overlapping systems, each with its own methodology:

• The Department of Insurance develops its own maps to track distressed areas — those with limited access to coverage or disproportionate premium-to-income ratios.
• CAL FIRE maintains official Fire Hazard Severity Zone (FHSZ) maps, primarily for building and zoning purposes.
• Private insurers often use proprietary risk models based on satellite data, vegetation analysis, and fire history.
• The Sustainable Insurance Strategy is creating yet another map that identifies regions with limited competition, requiring insurers to write more business there.

“One fire map could be created by one insurance company, another by the Department of Insurance, another by the Sustainable Insurance Strategy,” Susman noted. “So there’s not any one map I can point to and say, ‘This is the map.’”

This lack of standardization means homeowners in similar areas may receive vastly different rates or risk designations depending on which carrier they use.

Until the state adopts a more unified risk assessment model, expect this inconsistency to continue.

3. “What Is Ordinance and Law Coverage?”

Another listener asked about a topic that even many insurance veterans struggle to explain:

“What is ordinance and law coverage regarding dwelling replacement cost value?”

This coverage is one of the most misunderstood — and most essential — parts of your homeowners policy.

Susman broke it down like this:

When your home is damaged or destroyed, your insurance policy is designed to rebuild it as it was — not necessarily as it must be rebuilt under current building codes.

“In general, what insurance does is it’s supposed to rebuild your house from what happened,” Susman explained. “But if you’re talking about building code upgrades or things required by the city that weren’t part of your old home, that’s where ordinance and law coverage comes in.”

Essentially, ordinance and law coverage pays for bringing your home up to current building standards — something that can be extremely expensive in California.

For example:

• You lose your roof in a wildfire. Your local building department now requires solar-ready structural reinforcements or fire-rated underlayment.
• Your 1980s electrical system must be replaced with modern, code-compliant wiring.
• Your foundation or plumbing must be updated to meet seismic safety standards.

Without ordinance and law coverage, you’d be responsible for paying these extra costs out of pocket — even though you were fully insured for replacement.

“If you have a home built in the 1960s and it burns down today, your policy will rebuild it as it was — unless you have ordinance and law coverage, which bridges the gap between old and new codes,” Susman said.

He advised every homeowner to check their declarations page to ensure they carry this endorsement — and to increase limits if possible.

4. “Why Does My Carrier Care About the Details?”

Susman’s answers reveal a recurring theme: in today’s market, details matter more than ever.

Carriers are inspecting properties more closely, analyzing neighborhood fire access, vegetation density, and even roof composition before deciding whether to renew a policy.

“They’re going to be looking at your home,” Susman said. “They’re going to be looking at potential exposures around your home.”

Insurers are especially wary of homes located in wildland–urban interface (WUI) areas — regions where housing developments meet natural vegetation. These zones, from Sonoma to San Bernardino, have experienced some of California’s costliest fire losses.

Even if your home has never been threatened by wildfire, being near one of these areas can trigger higher premiums or non-renewal.

5. The “Book Cleaning” Phenomenon

Susman also shed light on an industry practice called “book cleaning” — essentially, insurers pruning their portfolios to eliminate higher-risk or less profitable policies.

“They’re taking advantage of the fact that the market is extremely tight,” he said. “So maybe a risk that they didn’t really want to have initially — well, that’s going to be one of the first ones they get off of.”

This process can feel arbitrary to homeowners, but it’s often a response to regulatory lag — the delay between when insurers experience losses and when they can get rate increases approved by the state.

In that gap, some companies simply choose to stop writing business altogether rather than operate at a loss.

6. Relief on the Horizon: Sustainable Insurance Strategy

Despite the frustration, Susman struck an optimistic tone about the future.

“Fortunately, as we’ve talked about again, we are at the end of this,” he said. “We should be seeing new regulations coming out literally any day.”

The Sustainable Insurance Strategy, spearheaded by Commissioner Ricardo Lara, aims to:

• Allow insurers to use forward-looking catastrophe models to price risk more accurately.
• Require insurers to write more policies in underserved or high-risk areas.
• Create transparency standards for wildfire risk scoring.
• Recognize and reward mitigation efforts like defensible space and home hardening.

Together, these measures could stabilize the market, encourage insurers to re-enter California, and eventually bring back competition — which is the only real path to affordability.

“Once competition returns,” Susman explained, “we’ll see better pricing, better service, and more stability. That’s what we’re all waiting for.”

7. What Homeowners Should Do Now

While reforms are in progress, Susman offered practical steps homeowners can take to protect themselves and prepare for market normalization:

✅ Review Your Coverage

Make sure your replacement cost accurately reflects current construction prices, which have risen sharply since 2020.

✅ Add or Increase Ordinance & Law Coverage

This endorsement is often inexpensive compared to the potential cost of code upgrades.

✅ Document Mitigation Efforts

Take photos of cleared vegetation, hardened vents, Class A roofs, and defensible space improvements — they may qualify for future discounts under the Sustainable Insurance Strategy.

✅ Stay Informed About FAIR Plan Changes

The FAIR Plan remains a critical fallback, but new reforms could expand its options and discounts soon.

✅ Work with an Independent Agent

Independent brokers can access both admitted and surplus lines carriers, helping you find coverage even when the major brands say no.

Final Thoughts: A Market in Transition

California’s insurance market is in a period of painful transition — but it’s not permanent.

As new modeling rules and mitigation incentives take hold, insurers will regain the confidence to write more business in the state. That means more options, fairer pricing, and a more resilient system overall.

For now, though, the best defense is knowledge — understanding what coverage you have, what you’re missing, and how to protect yourself during the state’s slow climb back to stability.

“These are extremely challenging times,” Susman concluded. “But help is coming. And if you understand the system, you can make it work for you.”