(Part 5 of 6) Mastering California Insurance: Insights, Tips & Listener Q&A

Published Date: 07/02/2024

Understanding California’s Fire Maps and Risk Ratings: Why Your Neighbor Pays Less for Insurance

It’s one of the most common — and frustrating — questions homeowners in California are asking right now:

“Why is my home suddenly uninsurable when my neighbor’s policy is still affordable?”

As insurance expert Karl Susman explained in a recent Insurance Hour listener Q&A, it often comes down to how fire risk is mapped and measured — a process that’s far more complex, and often less consistent, than most people realize.

From differences in wildfire modeling to accessibility issues and even the way insurers define “zones,” the risk rating system in California is under scrutiny as premiums skyrocket and entire communities struggle to find coverage.

This post unpacks the key questions Susman addressed — including how insurers assess risk, what fire maps actually mean, and why your premiums might be three times higher than someone living just a few miles away.

Question 1: How Is Risk Determined in My Neighborhood?

A listener from California asked:

“How is your risk determined if you live in a community of standalone homes, townhomes, apartments, and community areas?”

Susman’s answer was straightforward — but revealing.

Insurance companies rely on dozens of data points to determine a property’s wildfire risk. Some of the biggest include:

• Location and topography — How close your home is to forested or brush-heavy areas.
• Proximity to fire protection — How near the property is to a fire hydrant or a staffed fire station.
• Access for emergency vehicles — Whether fire trucks can easily reach and turn around at your property.
• Local infrastructure — Road width, slope, and escape routes.
• Fire history and vegetation patterns.

“They’re going to see where your property is,” Susman explained. “How close is it to a fire hydrant? To a fire station? What’s the likelihood of there being a fire? Can a fire truck get up there and turn around, or is it up a narrow, snaking road? All sorts of things go into what insurance carriers look at.”

The takeaway: even within the same ZIP code or community, homes can have drastically different risk scores based on micro-geography and accessibility.

Question 2: Why Does My Friend’s “Fire Zone” Cost Less?

Another listener shared a frustration familiar to many Californians:

“I have a home in Carmel Valley that’s becoming uninsurable. My premium went from $6,000 to $12,000 in two years. But my friends in Sonoma live near where the 2017 fire stopped — and their insurance is a third as much. Why?”

This disparity, Susman explained, often comes down to the fire maps that insurers use — and who creates them.

Most carriers develop their own internal fire risk models rather than relying on a single statewide system. Each insurer weighs data differently: some emphasize vegetation and slope; others focus on firefighting resources, wind patterns, or local loss history.

As a result, the same property could be labeled “moderate risk” by one company and “high risk” by another.

“It’s not like there’s one fire map that everyone uses,” Susman said. “Every carrier has their own version. That’s why you can have two identical homes a mile apart with totally different premiums.”

Who Creates and Updates Fire Maps?

There are several layers of fire mapping in California:

1. CAL FIRE’s Fire Hazard Severity Zone (FHSZ) Maps — These are official state maps, used mainly for building codes and fire mitigation planning. They classify areas as Moderate, High, or Very High risk.
2. Private Insurer Maps and Models — Proprietary systems used by carriers like State Farm, Farmers, or Allstate. These combine satellite data, climate modeling, and internal loss experience.
3. Third-Party Risk Models — Tools developed by independent companies (e.g., Verisk, CoreLogic, RMS) that provide modeling data to insurers and reinsurers.

Because private insurers can interpret risk differently — and aren’t required to follow CAL FIRE’s maps — discrepancies emerge.

“Your neighbor’s insurer might use one model, yours another,” Susman explained. “And those models might rate identical streets completely differently.”

This inconsistency fuels the frustration of homeowners who feel unfairly labeled as “high risk.”

The Rise of Catastrophe Models

Behind most modern fire maps are catastrophe models, or “CAT models” — data-driven simulations that predict the financial impact of potential disasters.

These models use thousands of variables, including:

• Historical wildfire data
• Climate and weather trends
• Wind speeds
• Fuel loads (vegetation types and density)
• Building materials and defensible space

They’re incredibly advanced — but they’re not perfect.

Critics argue that CAT models sometimes overgeneralize, lumping safe properties into high-risk zones simply because they’re nearby areas that have burned before.

Susman, however, sees them as essential tools for modernizing California’s insurance framework — as long as they’re used transparently.

“All the data, all the science, just the facts — fair and non-discriminatory,” he said in previous testimony before the California Department of Insurance. “It’s not about raising rates; it’s about making the system sustainable.”

Can You Challenge a Fire Map or Risk Rating?

Here’s where things get tricky.

In most cases, you can’t directly challenge an insurer’s internal fire risk map — those models are proprietary. However, there are still steps you can take:

1. Ask your insurer for details. You have the right to know the main factors behind your risk rating.
2. Get quotes from multiple carriers. Since each company uses its own model, another insurer may rate your property differently.
3. Document your mitigation efforts. Defensible space, cleared vegetation, fire-resistant roofing, ember-resistant vents, and Class A-rated materials can all help.
4. Request a mitigation review. Some insurers offer property inspections or appeal processes to reconsider rates based on improvements.

“If you can show you’ve hardened your home, cleaned up vegetation, and installed fire-resistant materials, you might be able to get reclassified,” Susman said.

The DIC Policy Confusion: Fire Exclusions and Wraparounds

One listener asked about a recent statement from a State Farm agent who described offering a “regular policy with a fire exclusion” instead of calling it a Difference in Conditions (DIC) policy.

DIC policies — sometimes called “wraparound policies” — have become common in California’s high-risk zones. They combine with the California FAIR Plan, the state’s fire-only insurance program, to create near-complete coverage.

The FAIR Plan covers fire and smoke damage, while the DIC covers everything else — theft, water damage, liability, etc. Together, they mimic a traditional homeowners policy.

Susman was intrigued but cautious about the “fire-exclusion” label.

“Every policy has a name,” he said. “If it’s not officially called a DIC policy, I’d be curious what product that really is. Calling it a ‘regular home policy excluding fire’ sounds more like a sales phrase than a product name.”

His takeaway: be sure you understand exactly what type of coverage you’re buying. The difference between a DIC and a partial exclusion could be the difference between being covered and not.

The Problem with “Fire Zone Inflation”

California homeowners often experience what Susman jokingly referred to as “fire zone inflation” — a steep rise in premiums year after year, even without new claims.

One caller reported premiums rising from $6,000 to $9,000 to $12,000 in just two years.

This happens because insurers are recalculating risk constantly, often based on updated satellite imagery, vegetation changes, and recent nearby losses.

When wildfires occur, surrounding ZIP codes can see rate adjustments even if they weren’t directly impacted. The logic is statistical — more fires nearby mean higher expected future losses — but the result can feel arbitrary and unfair.

Why Reform Is Coming

California regulators, led by Insurance Commissioner Ricardo Lara, are working to modernize the state’s risk evaluation system through the Sustainable Insurance Strategy — a package of reforms that includes:

• Allowing insurers to use catastrophe models (with oversight).
• Requiring transparency in wildfire risk scoring.
• Rewarding homeowners who mitigate risk.
• Creating consistent guidelines for insurers to expand into high-risk areas.

These changes aim to make pricing fairer and more predictable, while bringing major insurers back into the market.

“Hopefully we’re heading toward a place where mitigation and defensible space will actually count,” Susman said. “That’s how you create fairness.”

What Homeowners Can Do

If you’re facing rising premiums or non-renewals, here are steps you can take now:

1. Harden your home. Use Class A roofing, install ember-resistant vents, and clear at least 100 feet of defensible space.
2. Contact your agent early. Don’t wait for a non-renewal notice — explore options 90–120 days before renewal.
3. Combine FAIR Plan + DIC policies. Together, they replicate traditional coverage.
4. Shop across markets. Independent brokers can access admitted, surplus, and specialty carriers.
5. Stay informed. Follow updates from the California Department of Insurance on wildfire reforms and mitigation discounts.

Final Thoughts: Rebuilding Trust Through Transparency

California’s insurance crisis didn’t appear overnight, and it won’t be solved overnight. But the system is evolving — and so must homeowners’ understanding of how risk is assessed.

As Susman pointed out, knowledge is power:

“They’re going to look at where you are, how accessible it is, how close to firefighting resources — all of that. Once you understand that, you can take action.”

The key to navigating today’s market is education, mitigation, and transparency.

While insurers rely on complex models and proprietary data, homeowners can still influence their risk — and their rates — by making their properties safer and documenting every step.

Because in California’s high-risk landscape, understanding the map is the first step to changing it.