California’s Insurance Crisis Deepens as Major Providers Pull Out
As California continues to recover from devastating wildfires in early 2025, homeowners are facing a growing insurance crisis. Major insurance companies have begun pulling out of the California market, leaving many residents struggling to find affordable coverage.
The crisis was building for months and years before the disastrous 2025 fires. Insurers cited rising risks of extreme weather and growing rebuilding costs as reasons for dropping policies and refusing to insure certain high-risk homes. This left many California homeowners scrambling to find new coverage, with some turning to the California FAIR Plan, a state-backed insurance option of last resort.
Peggy Holter, a California resident who lost her 47-year-old home in the January wildfires, voiced her frustrations with the insurance market in an interview with PBS News Hour. “They made money off people [like me] for 47 years. That’s the point of insurance, isn’t it?” Holter said. “But, in this case, they’re saying, ‘We’re sorry. Too bad.'”
Like many others, Holter was dropped by State Farm, her previous insurance company, before the wildfires. While she was able to secure a policy through the FAIR Plan, she was concerned that the payout wouldn’t cover the full rebuilding costs.
Ricardo Lara, commissioner for California’s Department of Insurance, is working to address the issue. “If we’re going to ever get to affordable rates, we have to tackle the availability issue,” Lara told PBS News Hour. “Insurers have to come back to California and expand in order to bring down the cost.”
The California Department of Insurance is taking steps to stabilize the market. New rules allow insurers to consider disaster likelihood and reinsurance costs when determining rates. Lara is also advocating for homes to be built and upgraded with disaster-resistant features, which could mitigate potential losses and risks for insurers.
While there are efforts to address the crisis, there is no easy fix on the horizon. The situation affects not just homeowners but also renters and insurance companies. Lara testified to state lawmakers that he expects the California insurance market to stabilize in 2026, pending assurances from major insurance companies that the recent wildfires won’t impact their business.
The insurance crisis in California is part of a larger national trend, with other states like North Carolina and Florida also experiencing widespread losses due to natural disasters. “Climate change has affected every aspect of our lives, and I would be lying to you if I told you that [it] doesn’t impact insurance,” Lara said.
For now, California homeowners can explore options like the FAIR Plan for basic fire coverage. However, the long-term solution lies in stabilizing the insurance market and making homes more resilient to natural disasters.
