How We Got Here – A Look Back to Move Forward
This month, we encourage you to pause amid everything happening in our industry and reflect on an issue that may seem recent but has, in reality, been building for years. As insurance professionals, we know the California insurance crisis didn’t happen overnight. It’s the result of increasing risk, outdated policies, and regulatory challenges that have made it harder for insurers to operate in the state. If we don’t understand how we got here, we won’t be able to move forward in a way that truly benefits insurance professionals, homeowners, and business owners alike.
A Look Back: The Key Events That Led to This Crisis
1988 – Proposition 103 Passes
Voters approve Prop 103, requiring insurance companies to get approval from the Department of Insurance (CDI) before adjusting rates. While intended to protect consumers, it also created rigid price controls that have prevented insurance rates from adjusting to real-world risks.
2010-2020 – Rising Costs, Stagnant Rates
While insurance premiums across the U.S. increased by 34%, California’s only rose by 28.3%, despite multiple years of historic wildfire losses. Other wildfire-prone states, like Colorado, saw increases of over 73%. In California, insurers couldn’t adjust rates quickly enough to keep up with rising costs.
2020-Present – Insurers Start Leaving the Market
Unable to keep up with mounting claims and strict rate regulations, major insurance companies began pulling out of California. Meanwhile, wildfires and inflation drove up construction and rebuilding costs, making it even harder for insurers to remain profitable.
2023 – The FAIR Plan Becomes Overloaded
With fewer insurance options available, more Californians turned to the FAIR Plan, originally designed as a last resort. Now, the plan is struggling under the weight of demand, raising concerns about its solvency.
January 2025 – The Latest Fires Bring More Pressure
After another round of devastating fires, the pressure is on. It’s clearer than ever that this crisis isn’t just about climate change—it’s about an outdated regulatory system that has made it impossible for insurers to operate sustainably in California.
Where Do We Go from Here?
We can’t afford to ignore what’s happening. As insurance professionals, we are part of the conversation about real solutions that allow insurers to provide coverage while keeping rates fair. This means we are advocating for modern, flexible policies that reflect today’s risks for you, our clients.
We will keep you informed and stay engaged.
Sources:
https://www.npr.org/sections/p...
https://www.fixthecainsurancec...
https://calmatters.org/economy...
Blog written by Confessions of an Insurance Professional
