As California's property insurance market continues to reel from company withdrawals, policy non-renewals, and skyrocketing premiums, the question on every homeowner's mind remains: Is there a plan to fix this?
In a recent episode of The Insurance Hour, host Karl Susman sat down with Michael Soller, Deputy Insurance Commissioner for Communications at the California Department of Insurance (CDI), for a rare and candid conversation about what's really happening — and what the Department is doing to stabilize the system.
From State Farm's non-renewals to the rise of the FAIR Plan, from public frustration to policy reform, the interview painted one of the clearest pictures yet of California's insurance crossroads.
Soller began with the basics — a reminder that California's Department of Insurance serves a dual mission: protect consumers and maintain a stable, available insurance market.
"We're the largest insurance market in the country," Soller said. "That makes us the fourth largest in the world. Our goal is to make insurance as available as possible and keep rates as low as possible, given the risks we face in this state."
The Department oversees 8.7 million residential policies, ensuring not only that rates are justified, but also that claims are paid fairly — whether from wildfires, floods, or everyday household losses.
That oversight, Soller noted, includes working with brokers and agents to help consumers navigate disputes and find solutions when coverage options are limited.
When State Farm — California's largest property insurer — announced in 2024 that it would non-renew 30,000 residential and 42,000 commercial policies, the news sent shockwaves across the industry.
Soon after, credit rating agency A.M. Best downgraded State Farm's financial rating from A to B, citing concerns over solvency and underwriting losses.
Soller confirmed that the Department immediately launched a coordinated review.
"Their decision to non-renew less than a year after they paused new policies raises serious questions for us as the regulator," Soller said. "We're working with State Farm's home state of Illinois to get a full picture of their financial condition and their plan for improvement."
Despite public alarm, Soller reassured policyholders that State Farm remains solvent and capable of paying claims.
"This is more like an early warning system," he explained. "These policies don't cancel all at once. Non-renewals will phase in over a year, and customers should contact their agents to understand their options."
Still, the move underscores a deeper, systemic issue — one the Department is now working aggressively to address.
As more major insurers limit their exposure, homeowners are increasingly turning to the California FAIR Plan, the state's insurer of last resort.
But as Soller pointed out, the FAIR Plan is not government-run.
"It's still managed by private insurance companies," he explained. "If the FAIR Plan ever becomes insolvent, it can assess its member companies — meaning every insurer operating in California could be forced to pay a share of the losses."
That potential liability has made many carriers cautious about expanding their California market share — since the more business they write, the larger their FAIR Plan assessment risk.
"It hasn't happened since the Northridge earthquake," Soller noted, "but it's still a driving factor in why companies are pulling back."
The Department's goal, he emphasized, is twofold: strengthen the FAIR Plan while shrinking its footprint.
"It needs to modernize to serve people better — but at the same time, we want fewer people relying on it," Soller said. "That means restoring a normal, competitive marketplace."
In one of the most candid exchanges of the interview, Susman brought up a popular consumer theory — that insurers and regulators are colluding to manufacture a crisis in order to justify rate hikes.
Soller's response was immediate and firm:
"Absolutely not," he said. "Insurance companies are regulated under Proposition 103. They can set their rates only at levels appropriate to pay future claims — not more."
He explained that under Prop 103, rates must be:
Not excessive,
Not inadequate, and
Not unfairly discriminatory.
These guardrails ensure rates are fair and justified — and that the Department has final authority to approve or deny them.
"What's happening now isn't a conspiracy," Soller said. "It's a result of outdated rules colliding with modern risks. We're seeing the limits of a 35-year-old law."
He added that the Department is using "every tool possible" to improve availability, not just regulate price.
One of the biggest insights from the conversation was Soller's acknowledgment that the insurance crisis didn't appear overnight.
"Looking back, we had warning signs more than a decade ago," he said.
When companies like Allstate paused new business in 2007 — and stayed out of the market for eight years — the system didn't respond fast enough.
"We had delayed action for decades," Soller admitted. "And when global catastrophes increased and rebuilding costs exploded, it all hit at once."
Because Prop 103 requires lengthy approval processes for any rate change, insurers had limited ways to respond. The one option they did have — stopping new business — became their only quick fix.
Susman summarized it succinctly:
"Instead of collaborating with the Department to make small, timely adjustments, carriers hit the brakes entirely — because stopping writing is the only thing they can do instantly."
Soller agreed. "Exactly," he said. "That's how we got here."
Another contentious issue discussed was Consumer Watchdog, the advocacy group that frequently intervenes in rate filings under Proposition 103's "public participation" clause.
While the intent was to give consumers a voice, Soller argued the process has been co-opted by a single organization.
"In practice, only one group has materially benefited — and the system isn't helping Californians right now," he said. "We need everyone looking at the same facts, not just one organization acting as if it were the insurance department itself."
He emphasized that the Insurance Commissioner is an elected official — chosen twice by voters to oversee this process transparently and publicly.
"There's no backroom dealing," Susman added. "I've been to those hearings — everyone gets to speak. Everything is on the record."
So what's the solution?
Commissioner Ricardo Lara's Sustainable Insurance Strategy is a four-part reform initiative designed to modernize California's insurance system and get companies writing again — while keeping consumer protections intact.
Soller broke it down:
Insurers will be required to submit complete rate applications upfront, reducing the endless back-and-forth that has historically delayed approvals.
California is currently the only state that requires insurers to base pricing purely on past losses.
The new rules will allow forward-looking catastrophe models, incorporating wildfire mitigation, defensible space, and local firebreak investments.
"If homeowners and communities make themselves safer, that must now be reflected in rates," Soller said.
The Department will modernize how reinsurance costs — one of the largest drivers of premium increases — are factored into rate filings.
Finally, the strategy will update FAIR Plan operations and create a "roadmap off the FAIR Plan" for policyholders.
All four reforms are targeted for implementation by December 2024, after full public hearings and input from stakeholders statewide.
"By the end of the year, companies will be filing new rates under these rules," Soller confirmed. "And we'll be monitoring them to make sure they hold up their side of the deal — to start writing again."
Soller stressed that restoring the market isn't just up to regulators — it's a shared responsibility.
"Insurance companies have to manage their business effectively," he said. "But consumers also have to take steps to reduce risk."
That includes complying with California's Safer from Wildfires standards — maintaining defensible space, trimming vegetation, and hardening structures.
"People who live in beautiful, high-risk areas understand there's responsibility," he said. "Now, insurers must recognize those efforts with lower rates."
Susman agreed, adding that the mindset itself needs to evolve.
"Too often, people prefer a covered claim over preventing one," he said. "But a claim means a loss — and a loss is bad for everyone."
Soller acknowledged that the recovery won't be immediate.
"We haven't seen conditions this tough since the Northridge earthquake," he said. "But we're acting as fast as possible. Every day we're in meetings to move these reforms forward."
He urged both consumers and agents to stay engaged and reach out for help when needed.
"If your insurance company says they can't write your policy because your roof is too old — and you know it's not — call us," he said. "That's what we're here for."
Consumers can contact the Department directly at 800-927-4357 or visit insurance.ca.gov for assistance.
The message from both Soller and Susman was clear: California's insurance crisis wasn't created overnight — and it won't be solved overnight. But for the first time in years, there's a coordinated, transparent plan to fix it.
"Agents, brokers, and regulators are on the same side," Susman concluded. "We all want the same thing — availability, affordability, and accountability."
Soller agreed.
"We're not pointing fingers," he said. "We're building solutions. And that's how we'll get California insured again."
