The California insurance market is undergoing one of the most profound transformations in its history. Homeowners and consumers are facing record premiums, fewer carrier options, and an avalanche of regulatory changes—all unfolding against the backdrop of climate change, inflation, and mounting catastrophe losses.
For those trying to make sense of it all, insurance expert Karl Sussman, host of The Insurance Hour, offers a clear-eyed perspective: change is coming, but the real challenge lies in the transition. "Change is easy," he says, "but transition is hard."
So, what exactly is driving this transition? Why are insurers pulling back? And what can Californians expect once the dust settles?
Let's unpack the current state of California's insurance crisis and the path forward.
Over the last two decades, California has faced a dramatic shift in its risk landscape. Catastrophic wildfires, once considered rare, are now almost annual events. Historically, the insurance industry expected a "catastrophic event"—defined as a loss exceeding $1 billion—about once every six or seven years.
Today, that cycle has collapsed. As of late 2023, the U.S. insurance industry had already experienced 28 catastrophic events nationwide—and the year wasn't even over.
For insurers, this surge in frequency and severity has completely upended traditional pricing models. Their business depends on predicting losses based on past data, but climate change has broken those historical patterns. Events that used to be "once in a decade" are now happening multiple times a year, leaving carriers unprepared and unprofitable.
The ripple effects extend all the way through the industry—from frontline insurers to the reinsurance companies that back them. As reinsurance costs rise, many primary insurers have found it impossible to operate profitably in California's high-risk environment. Some have paused writing new business altogether, while others have withdrawn from the state entirely.
When insurers exit the market, competition disappears—and prices climb.
As Sussman explains, the basic economics are unavoidable: "When you have lots of insurance companies offering coverage, competition drives prices down. When you have only a few, prices go up."
That's precisely what's happening in California today. In many regions—particularly wildfire-prone areas—homeowners who once had seven or eight carrier options now have just one or two. And those remaining insurers can afford to be selective.
Underwriting requirements have tightened, premiums have soared, and in many cases, even qualified homeowners are being non-renewed. The state's FAIR Plan, originally designed as a last-resort option, has ...
