Proposition 103: How a 1980s Reform Became California's Most Controversial Insurance Law

When Californians passed Proposition 103 in 1988, they thought they were voting for lower insurance rates and greater accountability from an industry they believed was out of control.

More than three decades later, the same law is now being blamed for strangling California's insurance market — slowing approvals, driving insurers out of the state, and leaving homeowners scrambling for coverage.

To understand how we got here, we have to go back to where it all started: the 1980s.

The World That Created Proposition 103

The early 1980s were a different time — neon colors, shoulder pads, and the dawn of MTV. Technology was booming with personal computers like the Apple IIe, and cable TV was transforming media.

But alongside cultural transformation came economic turbulence. Under "Reaganomics," deregulation was the buzzword of the decade. The U.S. government rolled back oversight across multiple industries, including banking, aviation, and insurance.

This laissez-faire environment allowed the insurance industry to operate with minimal state interference. Premiums — particularly for auto insurance — began climbing rapidly.

At the same time, carriers were posting record profits. That disconnect — rising rates for consumers and rising profits for companies — created public outrage.

Lawmakers in Sacramento attempted several reforms, but gridlock and industry lobbying kept major changes off the table.

So Californians took matters into their own hands.

The Birth of Proposition 103

In 1987, a consumer advocacy group drafted Proposition 103, framing it as a rate rollback initiative and a battle against "insurance industry greed."

The proposition promised to:

• Reduce insurance rates by at least 20% from 1987 levels.

• Freeze rates for two years (until November 1989).

• Require state approval before any insurer could raise rates.

• Elect the state's Insurance Commissioner (previously appointed by the governor).

• Ban discriminatory practices in auto insurance pricing.

• Allow public participation through hearings and "interventions" in r ...

State Farm's Limited Return: What It Means for California Homeowners Facing Non-Renewals

For months, California homeowners have faced a grim reality: major insurers pulling back from the state's market, skyrocketing premiums, and limited access to coverage in wildfire-prone regions.

But there's finally a glimmer of good news.

As CBS 8 (KFMB) reported, State Farm — which previously announced it would non-renew approximately 30,000 homeowners policies across California — now says that some affected customers may be able to keep coverage through a companion policy paired with the California FAIR Plan.

Insurance expert Karl Susman joined CBS 8's David Gotfredson to explain what this means for homeowners, how "DIC" policies work, and why this partial return from State Farm could signal the beginning of a broader insurance market recovery.

What's Happening: A Partial Reinstatement, Not a Full Return

Earlier this year, State Farm made national headlines when it announced it would not renew tens of thousands of California homeowners policies, citing rising wildfire losses, higher reinsurance costs, and regulatory delays that prevented timely rate adjustments.

Now, in an effort to maintain some level of support for its customers, the company has introduced a "companion" policy option — officially called a Difference in Conditions (DIC) policy.

"The DIC policy is a homeowners policy excluding the peril of fire," Gotfredson explained in the segment. "It covers everything except fire damage."

In practice, that means homeowners will still need fire coverage through the California FAIR Plan — the state's insurer of last resort. The State Farm DIC policy then covers all the other risks, such as:

• Water damage

• Theft and vandalism

• Liability protection

• Wind and storm damage

Together, the FAIR Plan and DIC policy form a two-part solution that mimics the coverage of a traditional homeowners policy — though typically at a higher cost.

Why DIC Policies Exist — and Why They Matter Now

DIC (Difference in Conditions) policies aren't new. They've long existed as a way for homeowners in high-risk areas to maintain comprehensive protection when standard insurance isn't available.

When a majo ...

California's Insurance Reform Explained: Governor Newsom's Trailer Bill and the Push to Stabilize a Shaken Market

California's homeowners insurance market has been in crisis mode for years. Escalating wildfire risks, inflation, and outdated regulatory rules have driven major insurers to scale back or halt new business across the state. Now, with Governor Gavin Newsom's new "trailer bill" and Insurance Commissioner Ricardo Lara's Sustainable Insurance Strategy, California is attempting one of its most significant insurance overhauls in decades.

As insurance expert Karl Susman explained in an interview with Spectrum 1's Amrit Singh, this new legislation could be the turning point the state desperately needs — not because it allows insurers to raise rates faster, but because it finally enforces long-overdue regulatory efficiency and modernization.

Here's what's actually happening, what's in the bill, and what it means for homeowners, insurers, and California's future insurance landscape.

Why California's Insurance Market Is Broken

The crisis begins with climate-driven losses and bureaucratic delays.

In recent years, insurers have reported losing too much money to justify operating in California. The combination of wildfire claims, surging rebuilding costs, and restricted rate-setting has made the state one of the hardest insurance markets in the nation.

"The insurance industry says they're losing too much money in our state to keep insuring homeowners," Singh summarized. "Part of it's the premiums — they can't hike them quickly enough."

But as Susman pointed out, this isn't just about raising premiums. The real issue is how long it takes for any policy change to be approved — whether it's a rate adjustment, underwriting modification, or coverage revision.

"It's not even just a matter of premiums," Susman said. "It's any type of policy change. It can take months or even years. I think the record is over three years for an underwriting change to go through."

That's because all rate and policy filings must pass through California's Department of Insurance (DOI) under Proposition 103, the landmark 1988 law that governs how insurers operate in the state.

Proposition 103: The "Insurance Bible"

Proposition 103 was designed to protect consumers by requiring state approval for all rate changes and creating the position of elected Insurance Commissioner — currently held by Ricardo Lara. It also allows public participation in rate cases through a process called "intervention," where consumer groups can weigh in on whether rate increases are justified.

While those safeguards are still important, the law's administrative process hasn't kept up with modern realities.

State Farm's Partial Return to California: Progress or PR?

In a move that made headlines across California, State Farm — the state's largest home insurer — announced it will allow some homeowners to keep their coverage after dropping tens of thousands of policies earlier this year.

At first glance, that sounds like welcome news for a state still deep in an insurance crisis. But as FOX KTVU's Bailey O'Carroll reported, there's a major catch:

State Farm will renew certain homeowner policies — but will no longer cover fire damage.

It's a partial reversal that's being hailed by some as a step in the right direction, while others call it a bandage on a much deeper wound. Insurance analyst Karl Susman joined FOX to explain what this really means for California homeowners — and why it's only a small step toward solving a much bigger problem.

A Glimmer of Hope — with Big Limitations

In Orinda, a picturesque East Bay town surrounded by oak-covered hills, residents like Annie Bolen have been living under the shadow of non-renewal notices.

She had her policy canceled by Farmers Insurance nearly a year ago and has struggled ever since to rebuild the coverage she lost.

"My reaction was horror," Bolen said. "I thought I had escaped that."

To fill the gap, she now carries two policies:

• Fire coverage through the California FAIR Plan, the state's insurer of last resort.

• Supplemental coverage from another private insurer for theft, water damage, and liability.

Her premiums have nearly quadrupled — even as her overall coverage has gone down.

"Something that used to be affordable and complete," she said, "is now expensive and fragmented."

And that's where State Farm's announcement enters the picture.

What State Farm Is Really Offering

State Farm says it will begin renewing a limited number of existing policies, primarily for customers whose homes meet strict safety and risk criteria. But those policies will exclude coverage for wildfire damage — the very peril that has made California's insurance market so unstable.

"They won't do fire," Susman explained. "Well, that's the major risk. There hasn't been a fire in Orinda, but it's such a high-risk area."

California's Insurance Overhaul: Navigating New Reforms and Consumer Protections

California's insurance market is in the midst of the most sweeping overhaul in decades. After years of mounting instability — insurers pulling back, homeowners facing non-renewals, and small businesses losing coverage — policymakers are finally taking bold action.

At the heart of this transformation are Governor Gavin Newsom's trailer bill and Insurance Commissioner Ricardo Lara's Sustainable Insurance Strategy — two complementary efforts designed to modernize outdated regulations while preserving the strong consumer protections that have defined California's insurance laws for more than 30 years.

But as insurance expert Karl Susman explained on a recent episode of The Insurance Hour, not everyone is on board. Some long-standing advocacy groups are pushing back, claiming the reforms will "gut" consumer rights and hand the insurance industry a blank check. Susman calls those claims "factually wrong and dangerously misleading."

So, what's actually happening in California's insurance overhaul? Here's a deep dive into what these reforms mean, why they matter, and how they could reshape the state's insurance landscape for years to come.

A Market in Crisis

To understand why change is happening now, we need to look at how California got here.

Over the last decade, insurers in the state have faced massive wildfire losses — billions of dollars in claims that have outpaced premium growth. According to industry data, between 2012 and 2022, insurers in California paid out $1.13 for every $1.00 collected in premium.

That means companies have been operating at a loss for years.

Add to that construction inflation, reinsurance price hikes, and climate-driven risk escalation, and the result has been an insurance marketplace on the brink of collapse.

Major carriers — including State Farm, Allstate, and Farmers — have paused or restricted new business. Homeowners and business owners across the state have been non-renewed by the tens of thousands, forcing many into the California FAIR Plan, the state's insurer of last resort.

"This isn't about evil insurance companies," Susman explained. "It's about a broken system that doesn't allow them to operate sustainably. If they can't make money, they can't sell insurance — and that means consumers lose."

Outdated Rules for a Modern Risk

Much of California's current insurance regulation dates back to Proposition 103, passed in 1988. It established strict consumer protections, including:

Governor Newsom's "Trailer Bill" Explained: A Short-Term Fix for California's Insurance Crisis

California's insurance market has been in turmoil for years, with major carriers scaling back, pausing new business, or exiting the state altogether. The result has been a coverage crunch for homeowners and small businesses, especially in wildfire-prone areas.

Now, under growing political pressure to act, Governor Gavin Newsom has introduced a new "trailer bill" designed to stabilize the insurance market — at least temporarily — while longer-term reforms make their way through the system.

The legislation builds on Insurance Commissioner Ricardo Lara's Sustainable Insurance Strategy, which aims to modernize California's outdated regulatory framework. But as insurance expert Karl Susman explained in a recent interview with FOX KTVU, Newsom's proposal seeks to speed things up dramatically.

Here's what the bill does, why it matters, and what it could mean for insurers, regulators, and California consumers.

The Crisis: Insurers Leaving, Costs Rising

The state's insurance market is under immense strain.

In the last five years, wildfires, inflation, and rising construction costs have driven insurers' losses to historic levels. Companies like State Farm, Allstate, and Farmers have either paused writing new homeowners policies or significantly reduced their exposure in California.

Without enough carriers competing for business, prices have surged. Some homeowners have seen premium increases of 200% to 400%, while many small businesses have been forced into the California FAIR Plan — the insurer of last resort — which offers limited coverage at high cost.

"The companies cite wildfire risk as well as soaring construction costs for their withdrawal," reported FOX's Alex Savidge.

Against this backdrop, political pressure has mounted for the state to take action — and fast.

The Governor's Response: Streamlining Rate Reviews

Governor Newsom's proposal centers on streamlining the approval process for insurance rate changes — a key step in allowing carriers to operate sustainably in the state again.

Under California's Proposition 103, enacted in 1988, insurers must obtain approval from the Department of Insurance before changing rates or policy terms. While this consumer-protection measure was groundbreaking at the time, it's now seen by many as a bottleneck.

Susman explained:

"What this trailer bill will do is expedite part of the Insurance Commissioner's Sustainable Insurance Strategy. It's about making it faster for insurance ...

Navigating California's Homeowners Insurance Crisis: Expert Tips to Survive Soaring Costs

If you live in California, you've probably noticed your homeowners insurance premium climbing faster than almost anything else — except maybe your property taxes or grocery bill. Since 2018, homeowners insurance rates have risen more than 43% statewide, and in some areas, the increases have been far worse.

But for many Californians, the biggest challenge isn't just higher prices — it's finding coverage at all. Entire neighborhoods are facing non-renewals as major insurers pull out of the state or refuse to write new policies in wildfire-prone regions.

In a recent CBS/KCAL segment, consumer reporter Christine Lazar explored this growing crisis and spoke with insurance expert Karl Susman of The Insurance Hour for actionable advice on how homeowners can protect their properties — and their wallets — in this difficult market.

Here's what's happening, why it matters, and what you can do about it.

A Market on Fire

For West Hills homeowner Gaurav Barjuaj, the insurance rate hikes came as a shock.

"It's not near a brush-filled hillside or a dangerous slope," he explained, "but our homeowners insurance just increased more than 200%."

Barjuaj's story is becoming increasingly common. His 1,600-square-foot home isn't in an obvious high-risk zone, yet his premiums more than tripled. When he tried to shop around, he found only minor savings — "maybe four or five, ten bucks a month" — not nearly enough to justify the hassle of switching carriers.

That's because availability, not price, has become the real issue. As insurers limit coverage by ZIP code or territory, homeowners are left with fewer and fewer options.

In some communities, homeowners who once paid $1,500 to $2,000 per year now face bills between $5,000 and $6,000 — and those in the highest-risk areas can see premiums exceeding $30,000 or $40,000 annually.

"It's ridiculous," Susman told CBS. "People are paying more for homeowners insurance than they are for their property tax."

Why Coverage Is Getting So Hard to Find

California's insurance crisis is being driven by multiple factors converging at once:

1. Wildfire losses — Insurers have paid billions in claims over the past decade as fires grow larger and more frequent.

2. Rising rebuild costs — Labor shortages and construction inflation have dramatically increased what it costs to repair or replace homes.

Governor Newsom's New Home Insurance Plan: Will Speeding Up Rate Approvals Fix California's Market — or Make It Worse?

California's long-broken insurance system is finally getting a major overhaul — but not everyone agrees it's the solution the state needs.

In late May, FOX KTVU reported that Governor Gavin Newsom has unveiled a new plan designed to encourage insurance companies to return to California by cutting regulatory red tape and speeding up the rate-approval process.

For more than a year, insurers have been exiting or scaling back their presence in the state, citing wildfire risk, inflation, and outdated regulations. The governor's new proposal is meant to help fix that.

But while industry leaders say it could bring long-term stability, consumer advocates warn it may open the door to rapid and repeated rate hikes.

1. The Crisis at a Glance

Thousands of California homeowners have lost their insurance coverage over the last two years as major carriers — including State Farm, Allstate, and Farmers — have paused or limited business in the state.

The reasons are complex but interconnected:

• Rising wildfire risk has made underwriting more expensive and unpredictable.

• Reinsurance costs — the insurance that insurers buy to protect themselves — have tripled.

• Inflation has driven up home rebuilding costs.

• And Proposition 103, the state's decades-old insurance law, has made it difficult for insurers to adjust rates quickly enough to keep pace.

The result is a market in retreat. Tens of thousands of homeowners have been forced into the California FAIR Plan, the state's "insurer of last resort," which provides only limited fire coverage at premium prices.

Governor Newsom says the new plan is designed to reverse that trend.

"We need to stabilize this market," Newsom said earlier this month. "We need to send the right signals."

2. The Proposal: A 120-Day Deadline for Rate Decisions

Under current law, if an insurer wants to increase rates or change its coverage offerings, it must file an application with the California Department of Insurance (CDI). That review process can take months — or even years.

Newsom's plan would impose a 120-day deadline for the CDI to approv ...

California's Small Business Insurance Crisis: When Wildfire Risk Meets Market Retreat

California's insurance crisis isn't just hitting homeowners — it's threatening the survival of small businesses that form the backbone of local economies. From boutique inns to wineries, mom-and-pop shops to tourism operators, companies across the state are facing skyrocketing premiums or outright policy cancellations.

As KPIX/CBS Bay Area recently reported, even businesses that have invested heavily in fire prevention are struggling to stay insured. On a recent Insurance Hour broadcast, insurance analyst Karl Susman broke down what's really happening behind the scenes — and why relief may finally be on the horizon.

Guerneville: Beauty, Business, and a Growing Burden

Nestled along the Russian River in Northern California, Guerneville is known for its natural beauty — towering redwoods, vineyards, and charming riverside lodges. It's the kind of place that draws both visitors and dreamers looking to escape city life.

One of those dreamers is Bryce Schulfield, who purchased and opened a small bed-and-breakfast in 2019. He poured everything into the property, confident in its location and safety. What he didn't anticipate, however, was that insurance — not wildfire, not the pandemic — would become his biggest obstacle to staying in business.

"We noticed right away that the prices were going up exponentially," Schulfield said. "It's been a 222% increase since we bought the place."

Despite his efforts to protect the property — installing a 5,000-gallon water tank, roof sprinklers, and maintaining defensible space — Schulfield has been dropped by multiple insurers. He's now covered under the California FAIR Plan, the state's insurer of last resort.

And he's not alone.

When Safety Measures Don't Seem to Matter

What's especially frustrating for business owners like Schulfield is that their risk-reduction efforts often go unrecognized by insurance companies.

His property is:

• Surrounded on three sides by vineyards — a natural firebreak.

• Located next to a Cal Fire station.

• Outfitted with its own emergency water system.

Yet despite those factors, insurers have classified his location as "high risk" based purely on geography and vegetation models — not on-site realities.

"I don't think it's personal," Schulfield said. "We've just gotten caught up in this fire bureaucracy."

How Insurance Really Works: Turning Your Premiums into Protection

Insurance — it's one of those things everyone has, everyone pays for, but few people truly understand. Why do prices go up every year? How do insurance companies afford to pay huge claims when disasters strike? And where exactly does your money go once you've paid your premium?

In a recent episode of Insurance Hour, host Karl Susman broke down these very questions, explaining in plain language how insurance transforms a small premium into large-scale financial protection. Using a clever analogy involving Abraham Lincoln's log cabin, Susman illustrated the core principles that keep the insurance industry — and by extension, our economy — stable.

The conversation covered everything from risk pooling to reinsurance, investment income, and loss prevention. What follows is a deep dive into the fascinating (and surprisingly relatable) mechanics of how your insurance premium actually becomes a safety net.

The Roots of Insurance: From Fire to Financial Security

Insurance, at its core, is about managing risk. It began centuries ago as a way to protect against one of humanity's oldest enemies: fire.

Susman reminded listeners that the Hartford Insurance Company famously insured Abraham Lincoln's log cabin — not against lawsuits or liability, but against the simple, devastating risk of it burning down.

To explain how this worked, he created a modernized example:

Imagine Abe's cabin costs $1,000 to rebuild. Abe pays an insurance company $5 a year to guarantee that if it burns down, they'll pay the full $1,000.

Naturally, that sounds impossible — how could a company collect just $5 and pay out $1,000? The answer lies in how insurance companies spread and manage risk.

The Power of the Risk Pool

The first and most fundamental concept is risk pooling.

Abe's cabin isn't the only one insured. There are hundreds or thousands of cabins — each owner paying their own $5 premium. If only a few burn down in a given year, there's enough money in the pool to rebuild them all.

This concept — many paying for the losses of a few — is what makes insurance work. It transforms individual uncertainty into collective stability.

But Susman pointed out that insurance companies have to be smart about where they pool that risk.

"They're not going to insure every log cabin in one neighbo ...