California's insurance landscape is undergoing one of its most turbulent periods in decades. Insurers are leaving, rates are soaring, and policymakers are scrambling to find a path that balances market stability with consumer protection.
In a recent Insurance Hour broadcast, host Karl Susman unpacked the complex dynamics behind what many now call the California Insurance Crisis — a situation shaped by climate risk, outdated regulations, and fierce debate over proposed reforms from Insurance Commissioner Ricardo Lara.
This is more than an industry story. It's a defining test for how California — the world's fifth-largest economy — adapts its risk management systems to a new era of environmental and financial volatility.
Over the past several years, homeowners and business owners across California have faced a harsh reality: insurance is becoming harder to find and more expensive than ever.
According to Susman, more than 87% of insurers that once offered coverage in the state have either:
Stopped writing new policies,
Withdrawn entirely, or
Restricted the types of risks they're willing to cover.
The result is a fragile marketplace defined by scarcity, limited competition, and skyrocketing premiums. Those who still manage to secure coverage often pay significantly more — not because of greed or negligence, but because the economics of insuring California's climate-driven risks no longer add up.
The root cause? A perfect storm of catastrophic wildfire losses, regulatory rigidity, and economic imbalance between risk exposure and rate approval.
To understand the current crisis, it helps to look back to 1988, when California voters passed Proposition 103.
This landmark legislation reshaped the state's insurance system in three major ways:
It required prior approval from the Department of Insurance (DOI) for any rate changes — meaning insurers couldn't raise premiums without state authorization.
It made the Insurance Commissioner an elected position, ensuring accountability to voters rather than political appointment.
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