California is in the midst of an insurance battle — but the terrain has shifted from simple “rate cuts” to stabilizing availability while aligning price with risk. Recent wildfire activity underscores the volatility: in 2023, about 2.6 million acres burned in the U.S., the lowest annual total since 1998, and 2024 remained below the 10‑year average for acres burned — yet exposure in the wildland–urban interface keeps loss potential high (National Interagency Fire Center). The deadly Maui/Lahaina wildfire was a multi‑billion‑dollar event in 2023 (NOAA Billion‑Dollar Disasters), and the Bureau of Labor Statistics’ index for household insurance shows pronounced premium increases through 2024–2025, reflecting broader property‑insurance price pressure (BLS CPI).
Insurance companies are all too aware of the economic impact the fires are causing, and the policy conversation has evolved. The high‑profile 2020 proposal Assembly Bill 2167 did not become law (legislative status). Instead, the California Department of Insurance (CDI) is implementing a Sustainable Insurance Strategy that links regulated use of catastrophe models and limited recognition of reinsurance costs with enforceable commitments by insurers to expand writings in wildfire‑distressed areas via the Insurance Market Action Plan (IMAP) (CDI Sustainable Insurance Strategy; Reuters; Insurance Journal). Consumer advocates emphasize that any reforms must include strong transparency and guardrails to prevent excessive rate hikes.
[ Read: The Best Homeowners Insurance Companies in California ]
California Insurance Commissioner Ricardo Lara opposed AB 2167 and is now advancing the Sustainable Insurance Strategy, which pairs new ratemaking tools with consumer protections. CDI’s framework allows catastrophe models in rate filings with disclosure, governance, and transparency standards, and proposes rules to recognize a portion of reinsurance costs — in exchange for binding IMAP commitments by insurers to write more policies in high‑risk communities (CDI overview; Reuters; Insurance Journal). Core consumer protections remain: prior approval of rates under Proposition 103 and mandatory mitigation‑based discounts through the Safer from Wildfires framework (Cal. Ins. Code §1861.05; §1861.10; Safer from Wildfires).
Homeowners want affordable coverage, but averages can be misleading. Millions of U.S. homes — on the order of 4–5 million — are classified by industry analytics as at “high” or “extreme” wildfire risk, concentrated in the WUI where small ignitions can become catastrophic if winds and fuels align (Insurance Information Institute). The policy focus has shifted from blanket rate suppression toward risk‑reflective pricing with explicit safeguards, mitigation credits, and transparency requirements.
Do the Rate Cuts Benefit All California Residents?
California’s prior‑approval process can temper abrupt swings, yet many households in or near the wildland–urban interface have faced steep renewals or tightened terms as wildfire risk and reinsurance costs are repriced — even as 2023–2024 acres burned were below recent averages (NIFC; BLS CPI). Availability and price pressure often extend into adjacent neighborhoods.
Homes close to brush or mapped high‑hazard zones may encounter stricter underwriting (defensible‑space requirements, roof/vent standards), higher wildfire deductibles, or nonrenewals. CDI requires insurers to offer premium credits for verified mitigation under Safer from Wildfires, aligning price incentives with risk reduction (Safer from Wildfires; CDI overview).
Statewide averages therefore tell only part of the story — many owners in or near high‑risk fire zones are not experiencing the same outcomes as those in lower‑risk areas, which is why CDI’s reforms link new ratemaking tools to measurable IMAP commitments to write more policies in distressed ZIP codes (Insurance Journal).
How Rate Cuts Could Backfire
If rates remain below risk for too long, insurers may restrict capacity or tighten eligibility — including canceling or nonrenewing homeowners insurance for those living in high-risk burn areas. California law imposes guardrails after disasters: following a gubernatorial wildfire emergency, a one‑year nonrenewal moratorium applies to residential policies in designated ZIP codes, providing temporary stability (Cal. Ins. Code §675.1; CDI moratorium guidance).
It’s already happened: after major wildfire years since 2017, carriers nonrenewed policies in exposed ZIP codes and adjusted underwriting. SB 824 (2018) creates a one‑year pause on nonrenewals in specified ZIP codes after declared emergencies, but it does not require insurers to accept new business during that period, so shopping can still be difficult (SB 824; CDI moratorium guidance).
CA SB-824 may provide temporary relief for those insured, but it doesn’t prevent insurers from stopping new coverage to homeowners in certain areas. If fewer insurance companies accept new policyholders, it limits the number of available insurance plans for California residents during an already difficult time.
The moratorium is set to expire soon. What could happen to the insurance coverage of the 800,000 homeowners living in high-risk zones when the time is up?
Spreading the Risk
Two scenarios are likely. The moratorium expires and hundreds of thousands of homeowners get dropped by their insurers. Even more homeowners in neighboring areas may also face cancellation or nonrenewal as insurance companies cut their losses before further mandates from the state. Plummer is concerned that “all of the fire losses again this year may cause homeowners to have a very difficult time obtaining coverage they can afford.”
The second possibility may have wider-spread consequences. If insurance companies have their hands tied and can’t raise insurance rates or cancel the highest-risk policyholders, they may need to spread the cost of insuring homeowners in wildfire zones by raising insurance prices in other areas.
Options for Homeowners
With all the uncertainty at this time and the wildfires still burning, it’s difficult to know what the outcome will be — and whether home insurance rate cuts are sustainable. Homeowners who live in or near high-risk burn areas should look for options in case their insurance rates climb dramatically or end up non-renewed.
Working with an experienced insurance broker may be helpful. A good broker will know which insurance companies are providing the right coverage for your needs and budget. They may also be able to negotiate better prices on your behalf.
If you can’t find affordable coverage, the state-regulated Fair Plan provides uninsurable homeowners with fire insurance. Due to the number of devastating fires, Commissioner Lara doubled the coverage limit the Fair Plan offers to $3 million earlier in 2020. You’ll need to obtain basic homeowners insurance through a private insurer for general coverage and combine it with the Fair Plan for fire insurance.
The Bottom Line
The insurance industry is watching California closely. The state has suffered record losses from wildfires in the last couple of years and is currently experiencing new ones. In the meantime, legislators sensitive to the current state of the economy are pressuring insurance companies to maintain low insurance rates, as well as temporarily preventing insurers from canceling coverage.
It’s difficult to predict if the current situation in California is sustainable. Even homeowners in low-risk zones may see a jump in their home insurance rates if legislators and insurance companies don’t come to an agreement. Hopefully, both sides can come together to find a fair and reasonable solution for homeowners.
Photo by Bilanol / GettyImages
