California homeowners are facing one of the most confusing contradictions of the state’s insurance crisis: doing everything right, yet still being punished by the system. Many have upgraded roofs, cleared defensible space, installed ember-resistant vents, and replaced flammable landscaping — only to see their premiums rise or their policies canceled.
“We cut down every tree within 100 feet of our house and built a home that’s as fireproof as possible,” one Insurance Hour listener told host Karl Susman. “Concrete fiber siding, metal roof, surrounded by stone and gravel. But every agent still said no based on our address.”
Even after extensive mitigation, their California FAIR Plan premium didn’t change. As Susman explained, the current system still prioritizes location over prevention — but that may finally be changing.
Why Homeowners Are Reaching a Breaking Point
The emotional toll of California’s insurance crisis is hard to overstate. Homeowners feel trapped between rising premiums, shrinking coverage options, and a lack of meaningful rewards for responsible behavior.
“Premiums are high. Flexibility is low. It’s not what anyone wants,” Susman said. “And I don’t want to minimize that because it is a very frustrating circumstance.”
With most major insurers pausing new business or aggressively non-renewing in wildfire-prone regions, hundreds of thousands of homeowners have been forced into the California FAIR Plan — often as their only option.
The California FAIR Plan and Its Growing Limits
The FAIR Plan Association was created in 1968 as a temporary safety net for properties that couldn’t obtain coverage on the private market. It is funded by all admitted insurers in the state and was never intended to become a long-term solution.
But today, it has effectively become the default insurer for many high-risk communities. Enrollment has nearly tripled in the past five years.
“Unfortunately, because competition is basically non-existent, the carriers that are still offering coverage — including the FAIR Plan — can have their way,” Susman said.
Without competition, service suffers, pricing stabilizes at higher levels, and homeowners have few alternatives.
Why Mitigation Isn’t Reducing FAIR Plan Premiums
Across California, homeowners are investing heavily in fire-hardening measures:
- Clearing vegetation within 100 feet of structures
- Installing metal or Class A fire-rated roofs
- Adding ember-resistant vents
- Replacing wood decks and mulch with stone or gravel
These steps meaningfully reduce wildfire risk. Yet most homeowners see little or no premium relief from the FAIR Plan.
“The California FAIR Plan is heavily regulated,” Susman explained. “The discounts they offer — and what qualifies for those discounts — are written into law. They can’t randomly change them.”
Until state regulations change, the FAIR Plan simply cannot fully factor individual mitigation into pricing — no matter how fire-resistant the home may be.
The Sustainable Insurance Strategy and What It Aims to Fix
Launched by Insurance Commissioner Ricardo Lara in 2023, the Sustainable Insurance Strategy represents the most sweeping insurance reform effort in decades. Its purpose is to restore competition, modernize risk assessment, and finally reward mitigation.
Key components include:
- Allowing forward-looking catastrophe models instead of relying solely on historical loss data
- Requiring insurers to incentivize verified home and community hardening
- Streamlining rate approvals so insurers can operate profitably in California
- Expanding certain FAIR Plan coverage options while reforms take effect
“The new regulations coming out with the Sustainable Insurance Strategy are designed to do just that,” Susman said. “And I have every confidence that they actually will — in time.”
The “Address Problem” and Why Geography Still Rules
One of the most common complaints homeowners raise is that insurers base decisions almost entirely on address rather than construction or mitigation.
“A dozen agents gave us a ‘no’ based on our address,” the listener wrote.
This happens because insurers and the FAIR Plan still rely on broad geographic fire-risk maps that emphasize location, history, slope, and vegetation — not property-level improvements.
As a result, two nearly identical homes can receive wildly different underwriting outcomes based on ZIP code alone.
“Actual fire risk doesn’t have much to do with who’s getting the insurance right now,” Susman said. “That’s because the FAIR Plan’s rules are dictated by law.”
Until individual mitigation is formally incorporated into underwriting rules, location will continue to outweigh prevention.
How Regulation Has Limited Consumer Protection
Ironically, rules designed to protect California consumers are now contributing to the crisis.
Under Proposition 103, passed in 1988, all rate changes must be approved by the Department of Insurance. While intended to prevent excessive pricing, the system has become so slow and rigid that insurers can’t adapt quickly to:
- Construction inflation
- Rising reinsurance costs
- Rapidly escalating wildfire risk
As a result, many insurers have simply stopped writing new policies.
“We’ve regulated ourselves into paralysis,” Susman has said in past discussions.
This is why flexibility, data-driven pricing, and catastrophe modeling are central to the new reform push.
What Homeowners Can Do Right Now
Even as reforms move through the regulatory process, homeowners still have practical steps they can take:
Document all mitigation work. Keep photos, receipts, and inspection reports for every upgrade or defensible space effort.
Request a FAIR Plan mitigation inspection. While discounts are limited, qualified homes may still receive small premium reductions.
Work with an independent broker. Independent agents can access surplus lines markets and specialty carriers that may consider property-level mitigation more favorably.
Stay engaged with policy changes. The Department of Insurance regularly holds public workshops and hearings on new rules.
Be patient but persistent. Reforms take time, but preparation now will matter once new regulations are fully implemented.
Signs of a Market Shift
Despite the present frustration, there is cautious optimism that the system is finally beginning to turn.
“We will do everything we can, hopefully as an industry, to get to a better place,” Susman said. “And I truly believe we will.”
If catastrophe modeling, mitigation credits, and streamlined approvals are implemented as promised, homeowners who have invested in hardening their properties may finally see those efforts reflected in pricing and availability.
Final Thoughts: From Geography to Incentive
California’s current insurance framework unintentionally penalizes the most responsible homeowners. Those who invest the most in fire protection often receive no meaningful financial reward.
The Sustainable Insurance Strategy represents an opportunity to reverse that logic — shifting the system from one that punishes geography to one that incentivizes preparation.
“It’s not perfect,” Susman said, “but the Sustainable Insurance Strategy is a start. And that’s what we need — a start.”
Until then, homeowners should continue strengthening their properties, documenting every improvement, and staying informed. When reforms take hold, those proactive steps will be the foundation of a safer, more sustainable insurance future.
