Insurance Hour

California's fragile insurance market may be reaching a breaking point. As more insurers retreat from high-risk areas, tens of thousands of homeowners are being forced into the state's "insurer of last resort" — the California FAIR Plan.

But that system, designed as a safety net, is now buckling under its own weight. Officials are warning that the FAIR Plan may soon become financially unsustainable — potentially leaving policyholders, insurers, and even taxpayers exposed to billions in losses.

A March 2024 CBS KPIX investigation titled "Home Insurance Crisis Warning from California FAIR Plan" revealed sobering details about the program's growing instability and the urgent need for reform.

The California FAIR Plan Association was created in 1968 to ensure basic fire insurance for homeowners who couldn't get coverage in the traditional market. It was never meant to be a long-term solution — just a last resort.

But as climate change drives more intense wildfires and insurers retreat from high-risk zones, the FAIR Plan has ballooned into a massive, quasi-public insurer.

"The FAIR Plan continues to grow in size as consumers find themselves without coverage," said FAIR Plan President Victoria Roach during a recent public hearing. "As a result, we have doubled in size in the last three years."

That growth, she warned, comes at a steep cost.

"As those numbers climb, our financial stability comes more into question."

The FAIR Plan now carries roughly $300 billion in total exposure — the total value of property it insures — yet has only around $200 million in the bank.

As insurance broker Karl Susman explained to CBS News Bay Area:

"It's not hard to see that in the event of a large, catastrophic event, they're not going to have the funds to be able to pay for it."

By law, every insurance company operating in California must participate in the FAIR Plan, sharing in its profits and losses.

When the FAIR Plan's reserves are depleted by claims — say, after a major wildfire — the shortfall is covered by assessments on those participating insurers. The problem? Those companies then pass those costs on to consumers through surcharges or future rate hikes.

In e ...

California's fragile homeowners insurance market has been dealt another major blow. On March 22, 2024, KTLA 5 News reported that State Farm — the state's largest property insurer — will not renew approximately 72,000 home and apartment insurance policies across California this summer.

The decision comes less than a year after the company halted all new homeowner and business property policies in the state. It's the latest and perhaps most dramatic sign that California's property insurance system is under historic strain — one where climate risk, rising costs, and outdated regulation have combined to create a near-collapse in availability and affordability.

Let's unpack what this decision means for consumers, how it connects to broader market reform efforts, and what affected homeowners can do right now.

According to KTLA's report, State Farm will begin the non-renewal process on a rolling basis starting in July for home policies and August for apartment policies.

This move affects:

• 30,000 homeowners and rental dwelling policies, and

• 42,000 commercial apartment building policies.

In total, that's 72,000 non-renewals — representing about 2% of State Farm's total policy count in California.

While the percentage may appear small, the impact is enormous, particularly in high-risk wildfire zones where replacement coverage is scarce or unaffordable.

"Experts say those who will be dropped are almost certain to be properties considered a high risk for wildfires and other catastrophes," KTLA reported.

In other words, these aren't random cancellations. They're targeted withdrawals from regions where insurers have suffered the greatest losses — often the same areas still rebuilding from recent wildfires.

In a statement, State Farm blamed a combination of factors:

• Rising costs of construction, labor, and materials

• Increased frequency and severity of catas ...

California's insurance market is once again in turmoil. On March 21, 2024, State Farm, the state's largest property insurer, announced that it will not renew over 72,000 insurance policies across California — citing a need to "ensure its long-term sustainability."

This announcement marks another blow to a housing market already struggling with rising premiums, shrinking coverage options, and growing dependence on the state's FAIR Plan.

Let's break down what this decision means, who it affects, and what California homeowners and business owners can do next.

According to ABC10 Sacramento, the decision affects both residential and commercial customers:

• 30,000 homeowner, rental dwelling, and property policies

• 42,000 commercial apartment policies

That's more than 72,000 total non-renewals, representing roughly 2% of State Farm's policy count in California.

While that percentage may seem small, the impact is huge — particularly in areas already struggling to find private coverage.

"State Farm announced they will not renew 72,000 policies in California to, quote, 'ensure its long-term sustainability,'" ABC10 anchor Becca Habegger reported.

In plain terms: the company is trying to prevent deeper financial losses caused by skyrocketing reinsurance costs, inflation, and catastrophic weather events.

State Farm's move primarily affects two groups:

1. Homeowners and landlords with single-family or small rental properties

2. Commercial apartment property owners with larger buildings or complexes

Affected customers will begin receiving non-renewal notices well in advance of their policy expiration dates.

State Farm says it has been in communication with the California Department of Insurance (CDI) about the decision, and the department has encouraged the company to notify customers early and assist them in finding alternative coverage.

California's insurance landscape isn't just shaped by carriers and regulators — it's also influenced by local governments making decisions about fire prevention, flood control, and community readiness. In a recent episode of The Insurance Hour, host Karl Susman sat down with Das Williams, Santa Barbara County Supervisor and former state legislator, to discuss how governance and insurance intersect in the age of climate change.

Their conversation offered an unusually detailed and practical perspective on what's being done — and what still needs to happen — to make California communities safer, more insurable, and financially sustainable in the face of escalating climate threats.

Santa Barbara County, famous for its coastal beauty, now finds itself on the frontlines of climate-driven challenges. As Williams explained, the county has become one of the two fastest-warming regions on the western seaboard. That warming has brought more intense sundowner winds, which feed wildfires, and in turn, cause flooding and debris flow after the flames die down.

"Our basic task," Williams said, "is how do we get better at response and how do we get better infrastructure for flood control? Because we still have many creeks that do not have 100-year flood capacity."

To address that, Santa Barbara has invested in new debris basins and improved drainage systems — projects that rarely make headlines but directly influence insurance outcomes. As Susman pointed out, "These types of infrastructure upgrades almost fly under the radar. But they have a dramatic impact on property values and what's going to happen going forward as the insurance industry starts to price risk more accurately."

Infrastructure, in short, is becoming part of the insurance conversation. Communities that invest in resilience will see those efforts reflected in lower risk scores, better underwriting, and potentially lower premiums under California's evolving "Sustainable Insurance Strategy."

For decades, California's insurance market has operated under Proposition 103, which limits how insurers can price risk. Rates are largely based on historical losses, not forward-looking modeling. That's led to growing tension between insurers seeking modernization and regulators trying to preserve consumer protections.

Williams acknowledged that tension head-on. He described how California's Insurance Commissioner Ricardo Lara and Governor Gavin Newsom recently negotiated a compromise that could reshape the market — giving insurers more flexibility in exchange for expanded coverage availability in high-risk areas.

"Essentially, the state government will ...

California's insurance market has been under stress for years. Wildfires, floods, inflation, and an outdated regulatory system have driven insurers out of the state, leaving homeowners with skyrocketing premiums and limited options. But new action from the California Department of Insurance (CDI) may mark the beginning of long-awaited change.

In mid-March 2024, Insurance Commissioner Ricardo Lara announced a new proposed rule that could reshape how insurers set rates — and how fairly those rates reflect risk. The change, which allows companies to use forward-looking catastrophe modeling, is a cornerstone of Lara's Sustainable Insurance Strategy — a reform initiative designed to modernize California's decades-old insurance framework.

The announcement comes at a pivotal moment: after years of insurer withdrawals, skyrocketing FAIR Plan enrollments, and record losses, California is trying to find a balance between consumer protection and insurer participation.

Here's what this rule means, why it matters, and how it could affect homeowners in the months ahead.

For more than three decades, California has regulated property insurance rates under Proposition 103, a 1988 voter initiative designed to protect consumers from excessive premium hikes.

While well-intentioned, Prop 103 requires insurers to justify rate changes using only historical loss data — meaning they can't factor in future risks or predictive modeling tools widely used in other states.

That approach worked in a stable climate. But California's environment is anything but stable now.

As wildfire seasons grow longer and storms more severe, insurers argue that relying solely on the past no longer reflects reality.

"Currently, companies are only allowed to use historical data," the ABC10 report explained, "which they say doesn't allow them to set prices on a more accurate, granular level."

The result: carriers underprice risk in some areas, overprice it in others, and ultimately choose to leave the state altogether when losses become unpredictable.

Under the new proposed rule, insurers would be permitted to use forward-looking catastrophe models when submitting rate filings to the California Department of Insurance.

These models use AI, meteorological data, satellite imagery, and climate projections to simulate how disasters might affect specific locations — allowing insurers to price policies with far more precision.

California's homeowners insurance crisis has reached a defining moment. After years of catastrophic wildfires, floods, and insurer withdrawals, the state's Department of Insurance is taking a bold step: allowing insurers to use predictive computer models to set rates.

The reform, unveiled by Insurance Commissioner Ricardo Lara, is part of a larger effort to stabilize California's collapsing insurance market — one where traditional insurers have either paused new business or left entirely.

But as FOX KTVU's veteran reporter Tom Vacar explored in his March 15, 2024, segment, the move has sparked fierce debate. Will these new rules restore competition and bring insurers back? Or will they open the door to higher premiums for millions of Californians?

California's insurers have been sounding the alarm for years. Rising losses from wildfires, storms, and inflation have made the market increasingly unsustainable under the state's strict regulatory framework.

Vacar summarized the situation bluntly:

"By their own conduct — raising rates, canceling policies, refusing to sell new ones — insurers essentially laid down a gauntlet: Change California's insurance laws, or we are out of here."

The state's largest insurers — including State Farm, Allstate, and Farmers — have dramatically reduced their exposure, especially in high-risk wildfire areas. That exodus has left hundreds of thousands of homeowners dependent on the FAIR Plan, California's insurer of last resort.

Once a safety net for homeowners unable to find private coverage, the California FAIR Plan has now become the primary insurance option for many.

Insurance expert Karl Susman, who represents multiple carriers statewide, explained how severe the shift has been:

"Currently, upwards of 90% of traditional insurers are writing few, if any, policies at all," Susman told KTVU. "So the FAIR Plan — often called the insurer of last resort — has become the insurer of first resort."

He added that the FAIR Plan's growth has been staggering:

"They've gone from 7,000 brokers to over 52,000 in the last three or four months."

That explosion underscores just how far the private market has shrunk. And while the FAIR Plan fills a vital gap, it's also expensive and limited

As California's insurance crisis deepens, all eyes are on the California FAIR Plan Association — the state's "insurer of last resort" — which now finds itself at the center of legislative scrutiny.

At a recent California State Assembly Insurance Committee Hearing, lawmakers, regulators, and industry professionals convened to examine how the FAIR Plan is functioning amid a surge in demand.

Among those who testified was Karl Susman, an independent insurance broker with 30 years of experience, who delivered what many attendees later called one of the most concise and impactful commentaries of the day.

In his remarks, Susman outlined "The Three T's" he believes are critical to saving the FAIR Plan — and by extension, stabilizing California's collapsing insurance safety net:
Training, Technology, and Transparency.

The California FAIR Plan was established in 1968 as a temporary backstop for homeowners unable to secure coverage from private insurers due to wildfire risk or location. But in recent years, with carriers like State Farm, Allstate, and Farmers withdrawing or freezing new business in high-risk areas, the FAIR Plan's role has exploded.

Susman underscored this transformation:

"As you heard, the number of agents that are offering the FAIR Plan has ballooned up into the 50,000 range. And these are people that probably would not have written a policy in the past at all."

That surge, he explained, means thousands of new agents are suddenly writing FAIR Plan policies — often without adequate training or familiarity with the system.

"The likelihood of them doing it correctly is pretty low or impossible without training," Susman warned.

Susman's first priority is mandatory broker training or certification for anyone authorized to write FAIR Plan policies.

"If you write with any other insurance company," he explained, "you have to show the carrier you know their product — how to quote it, what it covers. I would suggest maybe the same thing for the FAIR Plan."

This proposal addresses one of the biggest pain points in the system: inconsistent policy setup and quoting errors, which lead to coverage gaps, billing issues, and frustrated policyholders.

A standardized certification program could mirror the training required by private insurers — ensuring that brokers fully und ...

In today's world, the phrase "new normal" applies to almost everything—from how we work to how we shop. But few industries illustrate this shift as vividly as insurance.

As Karl Susman, host of The Insurance Hour, explains in his latest episode, both consumers and insurers are grappling with unpredictable weather, soaring costs, and inflationary pressures that have fundamentally changed how risk is assessed and priced. From wildfires in California to floods in Texas, these challenges are not isolated incidents—they're signals of a global transition in how insurance works.

This blog explores the key themes from Susman's discussion: the impact of inflation on premiums, why rates differ so much across states, and what practical steps consumers can take to protect themselves and control costs.

Susman opens with an example familiar to many Californians: sudden weather alerts interrupting sunny days with warnings of flash floods or severe storms. "It's not hyperbole to say never before," he remarks. "Weather events we used to consider rare are now routine."

That unpredictability—what meteorologists once called "acts of God"—has become the norm. And it's not just California. Recent wildfires in Texas destroyed over 500 homes, shocking residents who rarely associate the Lone Star State with large-scale fire disasters. Even more concerning, many of those affected homeowners were uninsured.

When Susman investigated why so many had gone without coverage, the answers were sobering: "A lot of people said the premiums were too high. They simply couldn't afford it."

This raises an uncomfortable question for policymakers and the public alike: are rising insurance costs pricing people out of protection—or are consumers underestimating the true cost of going without it?

Susman doesn't assign blame but points to a bigger picture. "When we see insurance prices going up, there's a reason. It's not random, and it's not just happening in California or Florida—it's happening everywhere."

To illustrate just how uneven insurance pricing can be, Susman rattles off some eye-opening numbers:

• Alabama: $2,085 average annual homeowners premium

• Alaska: $1,019

• California: $1,266

• Colorado: $3,212

• Kansas: $4,0 ...

It's no secret that California's insurance market has been under enormous strain. For the past several years, homeowners have faced skyrocketing premiums, shrinking coverage options, and unprecedented carrier withdrawals. From wildfires and floods to inflation and outdated regulation, the state's insurance system has reached a breaking point.

In a recent FOX KTVU segment titled "Premium Prices Continue to Climb," insurance expert Karl Susman, president of Susman Insurance Services, sat down with anchor Frank Somerville to explain what's really driving this crisis — and why there might finally be reason for cautious optimism.

The conversation began with an eyebrow-raising fact: even as major insurers like State Farm and Allstate report record underwriting losses, they're still technically profitable.

"Billions of dollars in losses, but still making money — how does that work?" Somerville asked.

Susman broke it down simply:

"It's actually easier than it sounds," he said. "When you hear that the insurance industry is making money, that's sort of like saying if it's raining outside your window, it must be raining everywhere."

In other words, the insurance industry is global — and while some regions (like California, Florida, and Texas) are bleeding money from catastrophic claims, others (such as New Hampshire, North Dakota, Vermont, and Ohio) are still generating healthy profits.

Insurers offset losses in one market with gains in another. But when losses in high-risk states become too large or too unpredictable, even large carriers begin to retreat.

"There are states where they're able to turn profits," Susman explained. "However, there are other states — California, Florida, Texas, Colorado — where they're losing money to staggering numbers. That's why you're seeing them pull back in areas where they're not able to make a profit."

So why California?

Susman was direct: it's not about politics or population — it's about unpredictability.

"There's one thing carriers don't like," he said. "It's unpredictability. And all of a sudden, the fact that we're having rainstorm after rainstorm, wildfires, tsunamis, and major water events — these are not things carriers have been prepared for."

For decades, insurers priced California risks using historical data that no longer reflects today's climate reality. When wildfires began destroying entire communities, followed by back-to-ba ...

The podcast episode titled "Insurance Hour" from March 1, 2024, features host Karl Susman discussing with special guest Senator Catherine Blakespear her newly introduced legislation, AB 3067, which aims to promote safe firearm storage by requiring insurance companies to inquire about gun ownership and storage practices from policyholders. The discussion highlights the bill's focus on enhancing public safety through insurance market dynamics, parallels drawn between firearms and automobiles in terms of safety and insurance, and the potential for insurance to play a role in reducing gun-related incidents by incentivizing safe storage practices.

CHAPTERS:

### 1. Introduction and Guest Welcome
**[00:00]**
Karl Susman introduces the show and special guest Senator Catherine Blakespear, highlighting the focus on new legislation AB 3067 related to insurance and safe firearm storage.

### 2. Overview of AB 3067
**[02:16]**
Senator Blakespear explains the intent behind AB 3067, requiring insurance companies to inquire about gun ownership and storage practices, aiming to improve public safety through safer firearm storage.

### 3. Importance of Safe Firearm Storage
**[08:46]**
Discussion on the significance of safe storage in preventing accidents and unauthorized access, including the role of insurance in promoting safety measures.

### 4. Legislation Impact on Insurance and Public Safety
**[15:31]**
Exploration of how AB 3067 leverages insurance market dynamics to encourage safer gun storage, with parallels drawn to automobile insurance and public health models.

### 5. Q&A: Addressing Public Concerns
**[22:01]**
Addressing common questions and concerns about the legislation, including the registration process, insurance policy adjustments, and potential impacts on gun owners.

### 6. Discussion on Market Forces and Insurance Behavior
**[27:46]**
Further discussion on how the bill could influence insurance company practices and market forces to prioritize safety and risk management related to firearms.

### 7. Closing Remarks and Contact Information
**[33:01]**
Karl Susman and Senator Blakespear wrap up the discussion, thanking listeners and providing contact information for further inquiries about AB 3067.

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Insurance Hour is hosted by renowned insurance expert Karl Susman. Karl is a frequent guest on television stations such as ABC, CBS, Spectrum, The CW and FOX, and now his popular radio program is available online throughout California and world-wide.

Listeners can now tune in to Insurance Hour on great AM radio station KMET throughout the state of California.

In addition to traditional radio, Insurance Hour is available on several popular streaming platforms, ensuring that listeners can access the show at their convenience.

Audiences worldwide can now enjoy Insurance Hour at InsuranceHour.com, on YouTube, Amazon Music, Tuneln, Alexa, Apple Podcasts, and the iHeartRadio app.

For more information about "Insurance Hour" and its programming, please contact Lara Starr at [email protected]