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Insurance companies are starting to write new policies in California again after years of holding back as wildfire risk climbed higher.
The state Insurance Department says that means outgoing Commissioner Ricardo Lara’s new regulations, intended to boost insurance availability, are working. Each time a company declares its plans to sell policies again, the department touts it as a win. But the state has not released the number of new policies the companies have written so far.
Enter Consumer Watchdog, the advocacy group that often butts heads with the department. It released an estimate of new policy commitments: 12,189 since January 2025, when Lara’s so-called sustainable insurance strategy went into effect. The strategy allows insurers to use catastrophe modeling, which they say more adequately takes risk into account because it includes forward-looking models, and to factor in reinsurance costs when setting their rates.
Consumer Watchdog, whose numbers come from combing through insurance companies’ rate filings, says that number is low, considering insurers have requested or secured $571 million in rate increases under the new regulations.
The insurance department disagrees with the group’s analysis, saying it intends to release its own data and analysis, and discounting the group’s numbers as “incomplete and premature.”
Ben Armstrong, Consumer Watchdog’s actuary, is tracking voluminous but publicly available rate filings. He looked at insurers’ statements about the number of new policies they promise to write, and compared the new filings with each company’s previous rate filings. Armstrong told CalMatters it’s “not an exact science” because the filings mention commitments, not actual sales, and in some cases don’t include an exact timeline.
The new rules allow insurers to factor in catastrophe models and their reinsurance costs as long as they commit to increasing sales in high-risk areas. Of the 10 companies that requested rate increases under the new rules, only five have committed to selling more policies, the group’s analysis shows.
The regulations call for insurance companies to choose one of these options: Write 85% of their market share in high-risk areas; grow their policies 5% in such areas; or increase their number of policies 5% by taking customers out of the FAIR Plan. Some of the companies that have requested or secured rate increases claim they already meet the 85% threshold.
“What we’re looking at is the reality right now for Californians who have been saddled with rate hikes for the promise of more policies in the future,” said Carmen Balber, executive director of Consumer Watchdog.
The state has seen its deadliest and most destructive fires in the past decade. Several years ago, insurance companies started complaining that California, which has authority over premium increases, was not approving them quickly enough to allow insurers to match their rates to the growing risk of climate change and wildfires. Some companies stopped writing new policies, or decided not to renew existing ones. Lara’s new regulations — which include provisions championed by the insurance industry — aim to address the issue.
Balber said her group released its analysis to stress that the state needs to do more to ensure that fire-safe homes are getting insurance coverage. She said the number of new policies insurers committed to so far is “minuscule” compared with the number of policies in the last-resort FAIR Plan, which continues to grow, although at a slower pace. Property owners turn to the state-mandated, insurance-run alliance when they can’t buy policies elsewhere, so the higher the number of policies in the plan, the poorer the health of the main insurance market. As of June, the FAIR Plan still had about 697,000 active policies, up 157% since September 2022.
Michael Soller, spokesperson for the insurance department, said the department will release its analysis once it has looked at the overall market and the data it collects annually. He doesn’t know whether the department will release an analysis before Lara’s term expires in January. Californians will be voting for a new commissioner in November.
“Commissioner Lara has said the (sustainable insurance strategy) is not an overnight solution,” he said. “It’s a multiyear solution and recovery.”
David Russell, a professor of insurance and finance at Cal State Northridge, agreed with the department that Lara’s strategy will take time to work.
“Insurers are tiptoeing back into the market,” Russell said. “They’re doing it selectively. Those are still high-risk properties.”
Former Insurance Commissioner Dave Jones said Lara could have required insurers to write more high-risk policies, especially considering the starting point was low because it was set after a period of non-renewals and no new policies.
Jones also mentioned that surplus lines — policies from companies that are not licensed or regulated by the state, and not backed by the state if they go bankrupt — are growing in California because availability remains an issue.
Soller did not dispute any specific numbers in Consumer Watchdog’s analysis. But he pointed to Mercury saying that its eight-year goal is to shift about 6.5% of FAIR Plan residential policies, in line with its market share, to standard homeowners policies. “That alone represents tens of thousands of new policies,” Soller said.
But as of now, Mercury’s filing shows that it has committed to writing just 2,107 new policies in distressed areas — so that’s what’s included in Consumer Watchdog’s analysis. The state approved an $85 million rate increase for the company.
The company that has secured the highest rate increase of more than $150 million, Farmers, has committed to writing 5,596 new policies.
“Availability is improving, but at a cost,” Russell said. “That was always going to be the case.”
California’s average home insurance costs have risen 5% so far this year, one of the biggest increases in the nation, according to insurance-comparison site Insurify. More than 8 million homeowners in the state have insurance policies, according to the insurance department.
This article was originally published on CalMatters and was republished under the Creative Commons Attribution-NonCommercial-NoDerivatives license.
