In today's fast-moving digital world, misinformation spreads faster than facts — especially when it comes to complex issues like insurance regulation. One leaked email, a few out-of-context headlines, and suddenly, public understanding of an already complicated market becomes even murkier.
That's exactly what happened recently when internal communications between insurance industry representatives and California officials were selectively publicized — suggesting cozy relationships, backroom deals, and regulatory bias. But as KarlSusman, host of Insurance Hour and longtime advocate for consumer and industry transparency, explains, the truth is far more nuanced.
The issue isn't corruption — it's communication. And when media narratives distort how insurance reforms are discussed, it becomes nearly impossible for Californians to understand what's really at stake in their state's insurance crisis.
California's insurance system is in the midst of its most serious disruption in decades. Major insurers like State Farm, Allstate, and Farmers have restricted or paused new business. The state's FAIR Plan, designed as a last-resort safety net, has doubled its policy count since 2020.
At the heart of the problem is Proposition 103, a 1988 law requiring insurers to get prior approval from the Department of Insurance before adjusting rates. What was once a consumer protection measure has become a regulatory bottleneck — preventing companies from responding to inflation, wildfire risk, and reinsurance costs in real time.
As Susman points out, "Insurance companies aren't leaving California because they want to. They're leaving because the math no longer works."
The controversy began when a series of emails between insurance industry representatives and the California Department of Insurance (CDI) surfaced. Media outlets framed the correspondence as evidence that regulators were working "too closely" with insurers during the rulemaking process.
But according toSusman, these communications were routine and required by state law. Under California's Administrative Procedure Act, regulators are obligated to seek public and stakeholder input when developing or amending rules — including input from insurers, consumer advocates, and industry groups.
"It wasn't collusion,"Susman clarified. "It was collaboration — the kind that ensures any new regulation is grounded in reality, not ideology."
The so-called "leaked" emails were, in fact, publicly available documents on the state's website as part of the regulatory comment process. What made them seem secretive was how they were reported, stripped of context and turned into clickbait.
Much of the controversy centered around California's proposed "85% rule", which would require insurers doing business in the state to write at least 85% as many policies in high wildfire-risk areas as they do elsewhere.
To the public, this was portrayed as a bold consumer protection measure. But industry experts — includingSusman — warn that such mandates could make insurers less likely to return to the market at all.
"You can't legislate risk away,"Susman explained. "If companies are forced to write in places where they can't charge actuarially sound rates, they'll simply stop writing anywhere."
In essence, the 85% rule tries to use regulation to force coverage distribution — but without allowing pricing mechanisms to reflect true risk, it backfires.
The deeper issue isn't one set of emails — it's the lack of balanced transparency in how insurance reforms are communicated.
When advocacy groups release partial information, it skews the narrative and erodes trust. When media outlets prioritize controversy over clarity, public policy debates become emotional rather than factual.
"Consumers deserve to know what's really happening — not just what fits a headline,"Susman said.
He emphasizes that insurance regulation should be based on data, not politics. The industry's requests — to use forward-looking catastrophe modeling, factor in reinsurance costs, and modernize rate approvals — aren't corporate wish lists. They're practical tools that nearly every other state already uses to maintain solvency and market stability.
One of the main reforms being debated — and misrepresented — is the use of catastrophe modeling.
Currently, California regulators limit how insurers can use predictive models when setting rates. Instead, rates must be based on historical loss data, which doesn't account for escalating wildfire intensity or climate-driven changes.
This creates a dangerous lag between real risk and approved pricing.
"If you're driving your car by only looking in the rearview mirror,"Susman said, "you're going to crash."
Catastrophe models combine advanced data — climate trends, vegetation density, wind patterns, and mitigation factors — to create more accurate projections. Allowing insurers to use these models would make pricing fairer, not higher, by aligning premiums with true exposure.
Most other states — including Florida, Texas, and Colorado — already use these models. California's refusal to modernize,Susman argues, is part of why the market is collapsing.
As private insurers withdraw, more Californians are being forced into the FAIR Plan, which offers bare-bones fire coverage for properties that can't get insurance elsewhere.
Originally designed as a last resort, the FAIR Plan is now approaching 400,000 policies, a 200% increase in just a few years.
"The FAIR Plan was never meant to be a full-time insurer,"Susman reminded listeners. "It's a stopgap — and the more people who end up there, the worse it is for everyone."
The FAIR Plan doesn't diversify risk like private insurers do. Instead, it redistributes losses among participating companies, creating a feedback loop where insurers exiting the market still bear the cost of the system's failures.
This means that even insurers no longer writing new policies in California are being hit with FAIR Plan assessments, making it even harder to justify staying in the market.
When policy details are misreported, the result isn't just confusion — it's policy paralysis.
Lawmakers and regulators face mounting political pressure from media-driven outrage, making them hesitant to approve necessary reforms. Meanwhile, insurers grow more frustrated, consumers lose options, and the FAIR Plan swells.
"Misinformation has real-world consequences,"Susman said. "It's one thing to criticize insurers — that's fair. But when half-truths shape public opinion, everyone loses."
The problem isn't the presence of watchdogs — it's when watchdogs become attack dogs. Healthy debate requires honest representation of facts, not cherry-picked emails or insinuations of corruption where none exist.
For California homeowners trying to make sense of it all,Susman offers three key takeaways:
Insurance regulations written in the 1980s can't handle 2020s realities like climate change, inflation, and reinsurance volatility. The system needs modernization, not villainization.
When companies pause or stop writing policies, it's often because they're losing money faster than they can get approval to adjust rates. It's not profitable to stay in a market where rates are disconnected from actual risk.
Governor Newsom's Sustainable Insurance Strategy aims to speed up rate reviews and allow catastrophe modeling. But if the public distrusts the process due to misinformation, those reforms could stall — leaving everyone worse off.
Sussman's broader message extends beyond insurance: the media has a responsibility to inform, not inflame.
Complex issues like insurance reform don't lend themselves to quick soundbites. Oversimplified stories erode confidence and make meaningful change harder.
"Transparency is critical,"Susman said. "But it has to go both ways — regulators should communicate openly, and journalists should report accurately."
He suggests that future reforms include clearer public education campaigns about how rates are set, what drives costs, and how consumers can influence policy through mitigation, not just outrage.
At its core, the insurance crisis — and the misinformation surrounding it — is about balance:
Between consumer protection and insurer sustainability.
Between regulatory oversight and market flexibility.
Between accountability and accuracy in public communication.
California's recovery will depend on collaboration, not confrontation. That means regulators, insurers, and consumer advocates must engage honestly — and the media must tell the whole story, not just the headline.
"If we want affordable insurance,"Susman concluded, "we have to build a system where truth travels faster than fear."
Insurance may be complicated, but misinformation shouldn't be. When stories are stripped of context, public perception becomes policy — and bad policy hurts everyone.
As California navigates its way through market reform, transparency must remain the foundation. Because at the end of the day, insurance is about trust — not just between insurers and policyholders, but between policymakers, journalists, and the public itself.
