Quick summary:
• Wildfires in Los Angeles County have destroyed over 1,000 homes and businesses, with three major fires currently at 0 percent containment.
• Insurance companies, including State Farm, have canceled thousands of home insurance policies across California, citing rising risks and financial instability.
• California Insurance Commissioner Ricardo Lara introduced controversial reforms allowing insurers to pass reinsurance costs onto consumers and use catastrophe models to set rates.
• Critics say Lara’s policies prioritize insurance companies over consumers, potentially driving up costs and reducing transparency in risk assessments.
• As insurers pull out of high-risk areas, more homeowners are forced to turn to California’s FAIR Plan, a costly last-resort insurance option.
• Consumer advocates warn that without stronger protections, homeowners will face skyrocketing premiums and policy cancellations amid worsening climate-driven disasters.
• California is working on a public catastrophe model to increase transparency in risk assessments, but it may take years to implement and won’t be mandatory for insurers.
As deadly wildfires tear through Los Angeles County, leaving devastation in their wake, home insurance companies are under fire for canceling policies across California, leaving thousands of residents in high-risk areas without coverage. The Palisades, Hurst, and Eaton fires have collectively incinerated more than 1,000 homes, businesses, and other structures, forcing mass evacuations and putting lives at risk as residents scramble for safety and resources.
Fueled by fierce Santa Ana winds and extraordinarily dry conditions, all three fires remain completely uncontained, according to the California Department of Forestry and Fire Protection (CAL FIRE). The fires have claimed at least two lives, with hundreds of thousands of residents left without power and thousands more displaced from their homes.
The largest of the three blazes, the Palisades Fire, has scorched over 11,000 acres, with firefighters reporting dry hydrants in the area. The Eaton Fire has burned more than 10,600 acres, and the Hurst Fire has consumed over 500 acres, with authorities warning that containment remains out of reach.
Amid this destruction, anger toward insurance companies is mounting, with residents accusing insurers of abandoning them in their time of need. State Farm, one of California’s largest insurers, announced last year that it would not renew 30,000 home insurance policies across the state, including in areas now engulfed by flames. The company justified the move as necessary to avoid a “financial failure” that would negatively impact the broader insurance market.
Michael DeLong, research and advocacy associate at the Consumer Federation of America, criticized the insurance industry’s response to the climate crisis, saying insurers are using rising risks as a pretext to weaken consumer protections. “They’ve been waging a campaign against Proposition 103… a ballot initiative that got passed in the late 1980s that, among other things, puts in place a lot of consumer protections about insurance,” DeLong explained. “This has been a big deal for consumers, and it’s helped keep rates down. But insurance companies really hate these consumer protections and have been trying to weaken them.”
California Insurance Commissioner Ricardo Lara has introduced a series of reforms intended to stabilize the state’s insurance market amid increasing wildfire risks. However, critics argue that his policies prioritize the interests of insurance companies over consumers.
One of Lara’s most controversial changes involves allowing insurers to pass the cost of reinsurance—essentially insurance for insurance companies—onto consumers. DeLong warned that this move will likely result in higher premiums for homeowners. “Until a few weeks ago, California’s regulations didn’t allow the cost of reinsurance to be passed on to consumers, and now they do,” he said. “That’s probably going to drive up costs for consumers. The commissioner and the department say it’s going to make the insurance industry more stable—we’re kind of skeptical of that.”
Lara has also authorized the use of catastrophe models to assess disaster risk and set insurance rates. While these models can be useful, DeLong and other advocates caution that many models rely on incomplete or inaccurate data and lack transparency.
Jamie Court, president of the Los Angeles-based group Consumer Watchdog, criticized the lack of transparency in Lara’s policies. “Catastrophe models can say anything they want, and then we have to pay the rate,” Court said. He also raised concerns about a proposal allowing insurers to raise rates in exchange for a commitment to cover more properties in wildfire-prone areas, pointing out that the policy contains significant loopholes.
“When you look at the details… there are these big loopholes,” Court explained. “Insurance companies have to commit to 85 percent [wildfire area saturation] within two years—or they can do 5% more than they’re doing now. So if they’re at 0 percent, they can go to 5 percent. This is complete bullshit.”
As insurers retreat from high-risk areas, more Californians are turning to the state’s FAIR Plan, an insurer of last resort. The number of policies issued by the FAIR Plan has more than doubled since 2020, but the plan comes with limitations and high costs for homeowners.
DeLong encouraged homeowners to explore all available options, including the FAIR Plan, while also advocating for stronger consumer protections. “If the FAIR Plan is the only thing you can do, take that,” he advised. “In the meantime, you can reach out to the Department of Insurance and let them know that you want them to protect consumers and reject excessive rate increases.”
DeLong also recommended that homeowners take steps to reduce wildfire risks, such as clearing brush around their homes and upgrading to fire-resistant roofing materials. However, he acknowledged that these measures can be costly and out of reach for many families. “The problem is that all of that costs money, and not everyone may be able to afford that… California has recently started some proposals to provide grants to consumers to undertake these measures, and these should be expanded even more.”
One potential solution to improve transparency in risk assessments is a public catastrophe model being developed by the California Department of Insurance. The model would allow for greater public input and ensure that risk assessments are based on accurate and fair data. However, both DeLong and Court cautioned that the model is still years away from implementation and may not be mandatory for insurance companies.
“We’re a long way away from that, and it’s not even going to be something that companies have to use,” Court said. “I think it’s giving lip service, but I think it’s the right direction. It just needs to be much more aggressive.”
The insurance crisis in California is part of a broader trend across the United States, as climate change drives more frequent and severe natural disasters. In addition to wildfires, insurers are also pulling out of hurricane-prone states like Florida and Louisiana, leaving millions of homeowners vulnerable.
Without adequate government intervention, experts warn that the insurance market could become increasingly unstable, making it harder for homeowners to find affordable coverage.
“The California Department of Insurance is working on a public catastrophe model… but that’s going to take at least a couple of years to get off the ground,” DeLong said. “In the meantime, we need to ensure that consumer protections remain strong and that homeowners aren’t left without coverage when they need it most.”
To follow CAL FIRE and learn earn more about the fires including evacuations and resources for those affected, click here.
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