Insurance Hour

California's largest property insurer, State Farm, has officially received approval to move forward with major rate increases—and the ripple effects could reshape the state's fragile insurance market.

Following a court ruling and subsequent approval by Insurance Commissioner Ricardo Lara, State Farm can now increase rates for homeowners, renters, and condominium owners across California beginning June 1, 2025.

Homeowners will see rates rise by an average of 17%, renters and condo owners by 15%, and landlords by a staggering 38%. The hikes come as the company faces nearly $7 billion in wildfire-related claims from recent disasters in Los Angeles County and elsewhere.

For many Californians, already paying some of the highest property insurance costs in the nation, this decision is another sign of a system at a breaking point.

Insurance industry expert Karl Susman, speaking with KTVU's Alex Savage and Heather Holmes, explained that the ruling didn't surprise him.

"This is something that I was hoping would happen," Susman said. "I just wish it didn't take all these weeks to get it done, because contrary to what consumer groups are saying, a judge clearly thought the increase was justified—and approved it."

State Farm's request wasn't a typical rate adjustment. It was filed under a special "emergency rate increase" provision in California's insurance regulations. This rarely used mechanism allows insurers to bypass the state's lengthy rate review process—sometimes lasting months or years—when financial solvency is at immediate risk.

In essence, the company argued that without prompt rate relief, it could no longer operate sustainably in California.

The judge reviewed State Farm's financial data and agreed, calling the increase "fair and necessary" given the scale of recent wildfire losses and mounting reinsurance costs.

Normally, California's Proposition 103 requires insurers to seek prior approval before raising rates, allowing consumer advocacy groups to intervene and challenge filings. But this process is slow and often adversarial—leaving insurers waiting while losses and costs mount.

State Farm invoked a regulatory clause designed for urgent solvency concerns, arguing it needed immediate relief to remain viable in the state. The Department of Insurance concurred, granting approval pending a full evidentiary hearing later this year, scheduled for October ...

As wildfires continue to devastate California, the state's insurance system faces its most turbulent chapter yet. In a new legal twist, homeowners have filed lawsuits accusing major insurers of colluding to deny coverage in high-risk wildfire zones — effectively pushing consumers into the state-run California FAIR Plan.

These allegations have reignited a long-simmering debate over fairness, competition, and solvency in the Golden State's insurance market. At the heart of the controversy lies a painful truth: millions of Californians are struggling to find affordable home insurance — and the backup system designed as a last resort is now being treated as the only resort.

In a recent broadcast, insurance expert Karl Susman unpacked the complexity behind the lawsuits, offering crucial context for both consumers and policymakers trying to navigate the state's collapsing private insurance market.

According to reports, the lawsuits accuse more than 100 insurance companies of conspiring to withdraw from wildfire-prone regions, forcing homeowners to rely on the FAIR Plan — a state-mandated insurance pool collectively managed and funded by the very insurers named in the complaints.

The plaintiffs claim that insurers effectively "shut out" policyholders in high-risk zones as a coordinated effort to reduce losses and drive up rates later.

The numbers are staggering:

• Over half a million Californians are now insured through the FAIR Plan.

• Since the 1990s, there have been 19 major billion-dollar wildfires, causing more than $200 billion in total losses.

• In January alone, wildfires caused an estimated $131 billion in damages — but only $45 billion of those losses were insured.

These figures underscore the growing gap between insured and uninsured losses — a dangerous imbalance in a state where the risk of natural disasters is escalating every year.

While the lawsuits allege corporate conspiracy, industry veteran Karl Susman calls that theory implausible.

"Insurance companies compete. They don't collude," Susman said. "The idea that over 100 insurers would sit down and agree not to write business — even to the point of going bankrupt ...

When a 5.2-magnitude earthquake rattled San Diego earlier this week, it did more than shake walls—it shook Californians into reconsidering how prepared they truly are for the next "big one."

It's a familiar story: after every tremor, the phones of insurance agents ring nonstop. And while most homeowners assume their standard policies cover "acts of nature," the reality is quite different. As insurance expert Karl Susman explained in a recent interview, traditional homeowners' insurance does not cover earthquake damage.

This seismic event has reignited a long-standing conversation in California's insurance community: why are so few homeowners covered, and what can be done to close that protection gap?

Earthquakes are part of California's DNA. The state experiences hundreds of small tremors each year, but it often takes a noticeable jolt—like this 5.2 quake—to remind residents how vulnerable they are.

According to the California Department of Insurance, fewer than 10% of homeowners statewide currently carry earthquake insurance. That number drops even lower in Southern California counties, where high deductibles and complex policies discourage many from buying coverage.

Susman describes this recurring pattern as "a cycle of panic and neglect":

"Every time there's a quake, people rush to buy insurance. Then a few quiet years go by, they cancel their policies, and the cycle starts all over again."

But in today's insurance climate—where wildfire, flood, and climate-related risks are already stretching the system—many experts warn that earthquake exposure may be the next crisis waiting to happen.

One of the biggest misconceptions about earthquake protection is that it's included in homeowners or renters insurance. It isn't.

"Homeowners insurance specifically excludes earthquakes," Susman explained. "The only way to have coverage in the event of an earthquake is to purchase a separate policy."

That exclusion isn't just for shaking or cracking foundations—it extends to nearly all structural and personal property damage directly caused by ground movement.

So if your home collapses during a quake, or your walls crack from seismic vibration, you're on your own financially—unless you've secured a dedicated earthquake policy.

The episode covers a discussion between host Karl Susman and Assembly member Heath Flora about two significant California insurance bills. The first bill, AB 637 (Deceptive Disaster Relief Advertising Act), requires disclosure from for-profit entities soliciting business after disasters. Flora, drawing from his 15-year firefighting experience, explains how this bill addresses issues with 'ambulance chasers' who exploit disaster victims. The second bill, AB 1354, would allow Californians to deduct insurance premium increases from their taxes between January 1, 2025, and January 1, 2030. Flora discusses how Proposition 103's artificial suppression of insurance rates for 30 years has led to the current crisis, with an expected 22% rate increase across the board. The discussion emphasizes the need for market competition to stabilize insurance rates in California, which is the fifth largest insurance market globally.

Introduction and Guest Background

Host Karl Susman introduces Assembly member Heath Flora, who represents the 9th Assembly District. Flora's background includes 15 years as a firefighter with Cal Fire, experience as a volunteer firefighter, and business ownership. He brings expertise in agricultural and public safety issues to his role in the assembly since 2016.

AB 637: Deceptive Disaster Relief Advertising Act

Flora presents AB 637, which requires for-profit entities to clearly disclose their status when soliciting business after disasters. He describes witnessing 'ambulance chasers' at disaster scenes since 2002, including the Cedar Fire. The bill mandates transparency about any connection to government agencies or insurance companies, with violations carrying a $2,500 penalty per occurrence.

Consumer Protection and Implementation

Discussion covers how AB 637 will protect vulnerable disaster victims from predatory practices. Flora explains that the bill applies to all forms of advertising, including social media, and enforcement will be handled by the Attorney General, Insurance Commissioner, and Department of Consumer Affairs.

AB 1354: Insurance Premium Tax Relief

Flora introduces AB 1354, which would allow Californians to deduct insurance premium increases from their taxes between 2025-2030. The bill aims to provide relief during the transition period as insurance rates adjust after 30 years of artificial suppression under Proposition 103. Flora discusses the expected 22% rate increase and the need to restore market competition in California's insurance sector.

Market Competition and Future Outlook

The discussion concludes with Flora emphasizing the importance of bringing competition back to California's insurance market. He notes that only single-digit numbers of carriers are currently writing new policies in California, despite it being the fifth-largest insurance market globally. Flora advocates for steady, predictable rate increases rather than sudden large increas

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When disaster strikes, chaos doesn't end with the flames. For too many Californians, the aftermath of a wildfire or natural disaster brings a second wave of hardship—fraud, confusion, and rising insurance costs.

In a recent episode of Insurance Hour, host Karl Susman spoke with Assemblymember Heath Flora (R–Ripon), a firefighter-turned-lawmaker, about two important bills designed to protect consumers in California's volatile insurance environment: AB 637, the Deceptive Disaster Relief Advertising Act, and AB 1354, a proposal offering tax relief for homeowners facing skyrocketing premiums.

Both bills reflect a clear reality: California's insurance system is under strain, and consumers need protection—both from predatory practices and from the financial shocks that follow every new wildfire season.

The Problem:
After nearly every major fire in California, residents who have lost everything are bombarded by people promising help—some legitimate, many not. Assemblymember Flora describes them bluntly: "They're ambulance chasers."

Flora, who served as a firefighter for more than 15 years, recalls scenes at disaster zones where private attorneys, adjusters, and "consultants" lined up outside evacuation areas with business cards in hand before the embers were even cold.

"They'd hand out cards claiming to work with the Insurance Commissioner or a government agency. People were traumatized, desperate, and didn't realize these were for-profit businesses looking to make money off their loss."

The Solution — AB 637:
Flora's bill aims to protect disaster victims by requiring anyone offering paid disaster recovery or insurance claim assistance to clearly disclose:

• That they are a for-profit entity;

• That they are not affiliated with any government agency, insurer, or the Department of Insurance; and

• What their intentions and services actually are.

Violations would carry fines of $2,500 per incident, enforceable by the Attorney General, the Insurance Commissioner, or the Department of Consumer Affairs.

While the bill doesn't ban these services outright, it ensures transparency and accountability—especially at moments whe ...

California's insurance crisis continues to dominate headlines, and the latest chapter — State Farm's emergency hearing before the California Department of Insurance (CDI) — underscores just how fragile the system has become.

In an interview with The Afternoon News with Kitty O'Neal, insurance expert Karl Susman offered an in-depth analysis of what unfolded at the hearing, explaining why the outcome could shape the state's insurance market for years to come. The discussion centered on one key question: Can insurers afford to stay in California — and can homeowners afford for them not to?

The hearing in Oakland brought together three major players: State Farm, the California Department of Insurance, and Consumer Watchdog, a nonprofit advocacy group known for its strict interpretation of insurance regulations.

At the center of the dispute was State Farm's request for a 17% "interim" rate increase — an emergency measure the company argues is essential to maintaining solvency. State Farm's representatives presented data showing that, without this immediate increase, their California operation faces potential downgrades from credit agencies like AM Best and S&P.

A downgrade, they warned, would have a domino effect:

• Lenders could refuse to recognize State Farm's policies as sufficient collateral.

• Homeowners with mortgages could face loan recalls.

• Hundreds of thousands of policyholders might lose coverage if the company is forced to pull back.

As Susman explained, this isn't simply about corporate profit — it's about keeping the market functioning.

"If State Farm can't meet financial solvency standards, they'll have no choice but to reduce exposure," Susman said. "And that means more Californians ending up on the FAIR Plan, which was never designed to handle this volume."

The California Department of Insurance (CDI) — often seen as a consumer protection agency — took a surprisingly supportive stance during the hearing. The department agreed that the 17% increase appeared "justified and necessary" under current conditions.

According to Susman, this rare ...

California's property insurance market has reached a boiling point. Wildfire losses, skyrocketing reinsurance costs, and outdated regulations have all collided—leaving insurers squeezed and homeowners panicked. The latest flashpoint? State Farm's emergency request for a 17% rate increase—a move that has ignited heated debate among regulators, consumer advocates, and industry leaders alike.

Insurance expert Karl Susman, speaking on Insurance Hour, unpacked the dramatic hearing between State Farm, the California Department of Insurance (CDI), and Consumer Watchdog, offering an insider's look at what's really at stake—and what this could mean for millions of Californians.

At the heart of the controversy is State Farm's claim that it is financially strained by California's risk environment. According to Susman, the insurer went before the CDI and said, in essence:

"We need money—and we need it right now."

The company's financial ratings from AM Best and S&P have already been downgraded, signaling to investors and lenders that State Farm's California operations are under serious pressure. These downgrades can have cascading effects: if lenders lose confidence in the insurer's solvency, they may call in loans, affecting both State Farm and the homeowners who rely on its policies.

The proposed 17% rate increase, if approved, would inject much-needed capital into State Farm's California arm. The company has pledged that if the funds prove unnecessary later, it will refund premiums with interest—a promise designed to reassure both regulators and policyholders that this is an emergency measure, not a cash grab.

In a rare alignment with an insurer, the California Department of Insurance (CDI) has expressed support for the emergency rate hike. The Department views this as an "urgent matter" that must be resolved quickly to prevent further destabilization of the state's insurance market.

Why would a consumer-focused agency support a rate increase? Because, as Susman explains, the CDI's top priority is market stability. Without solvent insurers, consumers lose access to coverage altogether. And with State Farm holding roughly 20% of California's homeowners' insurance market, its health directly impacts everyone—from individual homeowners to the state's reinsurance framework.

The CDI's stance also reflects a calculated risk

California homeowners have endured a relentless barrage of wildfires, each season seeming worse than the last. But for many survivors, the real battle begins after the flames are out. As news stories and firsthand accounts continue to reveal, a growing number of Californians are discovering that the state's so-called "insurance of last resort," the California FAIR Plan, is failing to meet its most basic promise — to provide coverage when no one else will.

Recent reports highlight a disturbing trend: homeowners with smoke-damaged properties being denied or underpaid on claims, leaving them unable to safely return to their homes. The frustration, confusion, and financial strain are mounting — and experts say it's not just an administrative hiccup, but a systemic breakdown in how California's insurance safety net is functioning.

When a home is completely destroyed by fire, the insurance process is relatively clear. The loss is total, the damage is visible, and policyholders typically receive the maximum payout allowed under their policy.

But when a home survives — only to be filled with toxic smoke, ash, and soot — things get complicated. Smoke damage is often invisible, lingering in walls, insulation, HVAC systems, and fabrics. It can cause long-term health issues and property deterioration. And yet, these cases are precisely where insurance disputes are surging.

According to the California Department of Insurance (CDI), the FAIR Plan must cover smoke damage. But many policyholders say their claims are being undervalued or outright denied. One Pacific Palisades homeowner, whose townhome survived the Palisades Fire, reported that FAIR Plan adjusters determined his smoke damage didn't exceed his $2,500 deductible — despite estimates showing $25,000 or more in necessary cleanup and remediation.

When he questioned this, the FAIR Plan reportedly told him to simply "clean it up" himself using household elbow grease and a few rented air purifiers — an absurd suggestion given that his home tested positive for unsafe levels of lead and lithium in the air and insulation.

Smoke damage has been a contentious issue for years, but in 2022, it became a flashpoint for state regulators. Following an investigation into the FAIR Plan's claim handling practices, the Department of Insurance found widespread noncompliance with California law. The FAIR Plan had failed to properly evaluate and pay out smoke-related claims, forcing regulators to intervene and reopen nearly 60 cases.

The result was clear: the FAIR Plan was told to rewrite its policies and procedures to reflect that smoke damage must be covered as part of fire-related losses.

And yet, two years later, homeowners are still reporting the same denials and underpayments. Insurance expert Karl Susman, who has long tracked the FAIR Plan's performance, confirmed that the issue remains unresolved. He notes that while the Department of Insurance has made its stance explic ...

The tension between consumer protection and insurer solvency reached another high point this week in Oakland, where California's Department of Insurance (CDI) held a critical hearing that could reshape the future of homeowners' insurance in the state.

At the center of the debate: State Farm, California's largest insurer, which is requesting an emergency 17% rate increase on its homeowners' policies. The reason, according to the company, is simple but alarming — its reserves are running dangerously low following the devastating Los Angeles County wildfires earlier this year that destroyed more than 18,000 structures and caused an estimated $7.6 billion in losses.

While the hearing itself unfolded without dramatic fireworks, the stakes couldn't be higher. The decision will influence not only State Farm's ability to continue operating in California but also the future direction of the state's fragile insurance market — one already plagued by rising premiums, shrinking coverage options, and a wave of insurer exits.

California's insurance system is in the midst of what many call a slow-motion collapse. Years of catastrophic wildfires, inflation, and outdated regulation have made it increasingly difficult for insurers to price risk accurately — or even stay solvent.

According to filings presented during the Oakland hearing, State Farm General Insurance Company's surplus — the money used to pay claims — has fallen from roughly $4 billion in 2015 to just $1 billion in 2024. After the January wildfires, that figure is expected to decline even further to around $600 million.

To put that in perspective, a company of State Farm's size, covering nearly one in five homes statewide, needs several billion dollars in reserve to remain financially stable.

Without rate relief, State Farm says it may not have enough capital to pay claims if another major wildfire or earthquake hits — a chilling prospect for millions of Californians who rely on the insurer for protection.

"It's not in California consumers' best interest to allow the state's largest insurer to go bankrupt or withdraw from the market," one CDI official said during the proceedings.

State Farm's emergency filing isn't its first attempt to adjust rates. The company initially requested a 30% increase in June 2024, then scaled it down to 22% following negotiations with regulators. Now, after the wildfires, it has dropped the figure again to 17%, calling it the minimum necessary to st ...

In California, conversations around dinner tables often turn to the same topics: the next wildfire, the rising cost of living, and now, insurance. The crisis that has long simmered beneath the surface of California's property insurance market has once again taken center stage as State Farm, the state's largest insurer, requests another round of rate increases — as high as 22% for homeowners, 15% for condominiums, and 38% for rental properties.

For many residents, this is not shocking news — it's an unfortunate expectation.
As one Colfax homeowner put it plainly:

"We don't talk about sports and weather up here. We talk about insurance and fire risk."

That line perfectly captures what life is like in California's "fire country" — places where every dry summer day brings anxiety and where homeowners' insurance, once a given, has become both a lifeline and a luxury.

State Farm's latest rate request comes just months after it temporarily paused new homeowner policy sales across the state, citing unsustainable underwriting losses. The company claims that the math simply no longer works: it's paying out far more in claims than it collects in premiums.

In this most recent hearing in Oakland, representatives from the company met with California Insurance Commissioner Ricardo Lara and administrative law judges to make their case. Their argument is grounded in financial data showing that wildfire losses, inflation, and the skyrocketing costs of home rebuilding have combined to erode profitability.

To justify the rate increases, State Farm must provide:

• Comprehensive financial statements showing payout ratios and reinsurance expenses,

• Actuarial data linking risk to premium needs, particularly for fire-prone areas, and

• Proof that the proposed hikes are needed to maintain solvency — not to pad profits.

If the evidence satisfies the judge, Commissioner Lara's earlier tentative approval will become final. If not, the company could be forced to scale back or withdraw its request entirely.

The CBS 13 report highlighted the perspective of Liz Porter, a Colfax resident who lost her home in the 2021 River Fire. Her experie ...