California’s insurance market is broken. Outdated insurance regulations, significant delays in the rate review process and unsustainable mandates have led to insurers paying out far more in claims than they collect in premiums—creating market imbalance and shrinking consumer access to coverage. The Southern California wildfires reinforce the urgent need for reforms to stabilize the market and protect coverage for everyday and catastrophic claims.
Significant delays in California’s rate review process of up to a year or more result in outdated rate structures that force insurers to pay out more in claims than they collect in premiums—an imbalance that threatens consumer access to insurance.
FIX: Enforce 120-day review timelines under Commissioner Lara’s 2024 bulletin to keep rates aligned with actual risk and claims paid.
Outdated laws prevent insurers from accurately modeling the impacts of extreme weather—including catastrophic wildfires, flooding and earthquakes—leading to the inaccurate rating of risk.
FIX: Implement CDI’s 2024 catastrophe modeling regulations and approve proposed models for use to reflect real risk and reward mitigation efforts.
Reinsurance—insurance that insurers buy to cover claims during catastrophic disasters—is standard in all other 49 states, but California doesn’t allow insurers to account for it in ratemaking.
FIX: Implement CDI’s 2025 reinsurance regulations and allow rates to reflect actual costs.
The FAIR Plan is functionally insolvent following the devastating Southern California wildfires, leaving the state’s admitted insurers on the hook for potentially tens of billions in liability for past and future FAIR Plan losses, despite collecting no premiums from FAIR Plan policyholders.
FIX: Ensure the FAIR Plan’s wildfire losses are equitably spread across a broader pool of insured—not concentrated among a shrinking group of carriers – to prevent a catastrophic collapse of the insurance market.
A healthy insurance market needs adequate premiums to cover consumer claims. But for decades, unsustainable mandates that outpace premiums have pushed insurers to restrict new policies or exit the market entirely.
FIX: Reform outdated requirements and avoid new coverage mandates to restore market balance and keep coverage options available for consumers.