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California insurance crisis: What homeowners need to know

Illustration created with Image Creator from Microsoft Bing

A woman whose elderly parents lost insurance on their house in the mountains of Northern California: “What are they supposed to do? Who will insure them?” she asked.

A couple outside Fresno whose home insurance was not renewed due to fire risk: “We are surprised we hear nothing from Sacramento,” they wrote.

A man whose rental property in Stockton lost its insurance because it was too old: “How about San Francisco?” he asked his insurance agent. “They have so many over-100-year-old buildings. Who’s going to insure them?”

These are just a few of the Californians The Standard heard from after news broke a month ago that State Farm and Allstate—two of California’s largest home insurers—had stopped signing new home policies in the state.

It was like an earthquake. Homebuyers were shaken. Insurance agents wondered what the future held for their businesses. Realtors worried how it would affect their clients’ abilities to secure home mortgages. 

The aftershocks of the news are still rippling across California.

Home and residential property owners now report that other insurance providers have opted not to renew their policies, citing the structure’s age or wildfire risk. Companies are often tightlipped about their internal practices, making it difficult to identify a broader trend in insurance.

While much remains unclear, there are some things California homeowners can do and should know about the ongoing insurance turmoil.

Know Your Options

Despite State Farm and Allstate no longer signing new homeowner business in California, there are more than 100 other companies still operating in the state.

If your policy has not been renewed or you need a new one, you should seek these other insurers out, according to Harvey Rosenfield, the founder of nonprofit Consumer Watchdog and the author of Proposition 103, a 1988 law governing the insurance industry. 

“You've got to shop around,” he said.

Are you affected by insurance changes in California? Email us at You can also call us at 415-408-6000 or send us a text message at 415-408-6282.

Even if you cannot find a private insurer, you still have an option: the FAIR Plan, an insurance policy of last resort funded by the industry. It covers people who cannot otherwise find fire insurance.

FAIR (Fair Access to Insurance Requirements) is intended to be a short-term solution, and its rates tend to be higher than regular insurance. Nonetheless, there are no limits on the amount of time you can use the plan, and it can be a godsend for homeowners in fire zones. 

Flames consume a house near Old Oregon Trail as the Fawn Fire burns about 10 miles north of Redding in Shasta County on Sept. 23, 2021. | Ethan Swope/AP Photo

Homeowners should also know their rights, Rosenfield said. 

New regulations that took effect in April require insurance companies to provide homeowners with their “wildfire risk score” and tell them how they can improve that score. When homeowners take measures to mitigate their wildfire risk—for example, removing combustible brush from their property—the insurance company is supposed to give them a discount.

However, the new rules have a flaw.

“There's a big loophole in those regulations that allow the companies to just non-renew you if they don’t want to give you a discount,” Rosenfield said.

Know the Other Changes

In recent years, when insurance companies have decided to stop covering houses in parts of California, the reason has usually been wildfire.

Since State Farm and Allstate retreated from the California market, realtors tell The Standard that they see insurance companies being more selective about what properties they will cover for other reasons.

The companies are “being a lot more specific. They want information about permit histories,” Frank Villanueva, a San Francisco-based agent with Compass Real Estate, said last month. “I’ve been asked things in the last few weeks that I haven’t been asked before.”

In messages to The Standard and social media posts, several Californians have reported that their insurance companies declined to renew policies on residential buildings constructed in the 1920s because of their age. 

Importantly, these properties were not primary residences—something that can affect whether a provider will insure it. 

While it remains unclear whether these decisions represent a coherent policy and which companies may be pulling policies for older buildings, age and the amount of improvements needed on a structure appear to be factors now receiving more attention from insurers.

Know the Debate

At the center of the struggle over insurance in California is Proposition 103, which requires insurance providers to get “prior approval” from the Department of Insurance before raising their rates.

Under the law, when a provider requests a rate increase of over 6.9%, the public can demand a hearing, which can lengthen the application process and increase the cost for the insurer.

If you ask the insurance industry, Prop. 103 is the cause of California’s coverage woes. 

Insurance companies are facing growing costs from wildfires, climate change and runaway inflation. The proposition is an obstacle to the providers being able to increase their rates to the levels they need, according to Mark Robinson, who leads the Regulatory Practice Group at law firm Michelman & Robinson.

“I think there needs to be a mechanism for these insurance carriers to increase their rates,” he said. “That seems to be the bottom line: They need to be able to get more rate in order to offset all the costs that they're experiencing.”

But Rosenfield, who wrote Prop. 103, sees the situation differently.

“The insurance companies are trying to create shortages and panic in the California marketplace,” he said.

He says they are using climate change as a “battering ram” to force through excessive rates and privately created models for setting premiums in a bid to evade public scrutiny. 

Rosenfield believes that State Farm and Allstate’s decisions to stop selling new policies in California violate Prop. 103. According to him, their decision to pull out is a de facto rate increase for which they did not receive permission from Insurance Commissioner Ricardo Lara.

The commissioner can temporarily force them back onto the market until they receive permission to exit, he said. 

When asked about the legality of its retreat from California, State Farm referred The Standard to a previous press release. Allstate said it complies with all state regulations.

“We paused new homeowners and condominium insurance policies in California last year so we can continue to protect current customers,” a spokesperson said in a statement. “The cost to insure new home customers in California is far higher than the price they would pay for policies due to wildfires, higher costs for repairing homes, and higher reinsurance premiums.”

More broadly, Rosenfield believes the issues in insurance will require public policy solutions.

“We need to have the government pass a law that says if insurance companies want to sell auto insurance here in California, they're going to sell home insurance, too,” he said. “They don’t just get to move in and out of the market like pirates.”

Correction: This story has been updated to reflect that there are over 100 insurance companies operating in California.