California Insurance Crisis?

I apologize if I’ve sounded like a broken record the past year; I certainly don’t mean to, that’s for sure. However, our state is experiencing a major insurance crisis, primarily affecting the homeowner’s market due to a combination of increasing climate-related risks—especially wildfires—soaring rebuilding costs, and regulatory challenges. This has led to major insurance companies limiting or halting new policies, making coverage difficult and very expensive to obtain.

Key Issues Affecting The Home Insurance Market In California

Insurance companies leaving the state: Seven of the top 12 home insurance carriers have either reduced coverage, gone into a moratorium, or left the state entirely. This has left many homeowners with limited options.

High Costs: Inflation and supply chain issues have driven up the cost of labor and materials needed for repairs and rebuilding, leading to higher claims payouts for insurance companies.

Wildfire Risk and Climate Change: The increasing frequency and severity of wildfires have led to huge financial losses for insurers. Nine of the ten largest fires in California history have occurred since 2017.

Regulatory Issues: Regulatory issues going back to the late 1980’s when Proposition 103 was implemented in the state that requires companies to base their rates on past losses rather than future risk projections and involves lengthy rate approval processes.

The CA FAIR Plan: As more major carriers leave the state, homeowners are forced to access the state’s “insurer of last resort.” The Fair Plan is becoming financially strained and could face issues in the near future that could result in potential surcharges being passed on to insurers.

As always, my best advice is to contact your local insurance professional to review your current insurance portfolio to confirm that you’re receiving all of the available discounts without gaps in coverage.

*This article was originally posted in The Valley Business Journal