California’s insurance market is in crisis. Prices are spiking (opens in new tab). Small businesses can’t get the insurance they need to operate (opens in new tab). Condominium owners can’t sell, because buyers can’t find insurance. Entire neighborhoods find themselves uninsurable. More and more homeowners are forced to use the (opens in new tab)FAIR Plan (opens in new tab), the state’s insurer of last resort, which provides inadequate coverage and poor service. The situation is outrageous and unfair. California’s insurance regulation is failing the customers it is supposed to serve.
The next insurance commissioner must fix the market, while ensuring that consumers — not insurance companies — have the power.
For years, (opens in new tab)insurance companies couldn’t use models to predict wildfire risk (opens in new tab) and had to extrapolate from history to establish rates. This was obviously unsustainable in a world where climate change is dramatically raising the toll of disasters, and it caused many insurance companies to leave the state.
The Department of Insurance is now allowing insurance companies to use predictive models (opens in new tab) to assess wildfire risk. But because the market is so uncompetitive, the department must prevent price gouging by the few companies still operating in California.
The way to stop the gouging is to give customers more power. Prices are kept in check when companies must compete for business. But choice and competition in California are limited because it takes the Department of Insurance nearly 300 days to approve insurers’ rate applications, versus a national average of 60 days. California must speed up this process and make competitive rates available to customers much faster.
We must also bring prices down by addressing the main reason for rising premiums: the increasing risk of catastrophic wildfires. California remains well behind the level of controlled burns needed to reduce such events. The Department of Insurance must urge the rest of the state government to learn lessons from places that do better, such as Australia (opens in new tab).
At the same time, homeowners must be given clear guidance on how to harden their homes. The Board of Forestry and Fire Protection (opens in new tab) is finalizing science-based standards called Zone Zero (opens in new tab). Once this is complete, insurance companies must be required to offer appropriate discounts for customers who follow the board’s guidance, and appropriate financial assistance must be offered to help homeowners shoulder the cost.
Requiring insurance companies to recognize home hardening is one example of how an effective regulator can force insurers to toe the line. There are many others.
The typical homeowners policy significantly (opens in new tab)underestimates the replacement cost (opens in new tab) of an insured home. The Department of Insurance has the data needed to fix this problem. The next insurance commissioner should mandate that potential buyers are informed how much an insurance company is underestimating their home’s replacement cost, and the company must offer the option to purchase sufficient coverage to close the gap.
But it is not enough to make sure insurers cover replacement costs. They must also pay promptly for legitimate claims. Far too often, insurance companies adopt the strategy of “delay, deny, and defend (opens in new tab)” instead of fulfilling their obligations to policyholders.
The Department of Insurance (opens in new tab)analyzes insurance company claims performance (opens in new tab) but does not make the data easily available to customers. The regulator should create a straightforward report card that grades each insurance company on its “justified complaint ratio” — the percentage of claims that are deemed legitimate — and provide it to customers before they purchase a policy. Consumers must know in advance whether an insurance company has a clean record or a reputation for having too many complaints against it.
Customers and policymakers need objective data to make sure pricing is reasonable, sustainable, and fair. The Department of Insurance should implement an annual benchmarking report that compares California’s insurance rates to those of other fire-affected Western states, and that report must account for the sky-high cost of living in California. We should never merely trust that the market is keeping insurance companies in line. We need to verify that prices are fair and reasonable with comparison and analysis.
Lastly, California’s leadership in artificial intelligence provides an exciting opportunity to use new technology to decipher arcane insurance terminology. A carefully vetted AI model could provide customers with free, plain-language answers to all questions they have on any insurance policy registered with the Department of Insurance.
Skillfully deployed, such a model could substantially improve customer understanding and even reduce policyholders’ lawsuits against insurers — with the savings in legal bills passed along to customers.
Our insurance crisis was not preordained. With the right leadership, California can have fair and reasonable coverage that protects communities and benefits consumers.
Patrick Wolff is a candidate for California insurance commissioner in the June 2026 primary.