- California was already in the midst of an insurance crisis before Tuesday’s fires
- Major insurers dropped property policies for residents, including in Pacific Palisades
- Experts predict premiums will continue to rise for the whole region and it may get harder to secure a loan.
Even before this week’s wildfires in Los Angeles County, California was in the midst of an insurance crisis spurred by the threat of intensifying wildfires and other extreme weather events.
Since 2022, major insurance companies have either stopped writing new policies, pulled back coverage, or dropped residents altogether. Last March, State Farm, the state’s largest home insurance provider, dropped 72,000 property policies in the state, including 69% of policies in Pacific Palisades.
This week’s fires will only worsen the situation, insurance and real estate experts told Business Insider.
“It’s like we took two steps forward, then we just took five back,” California insurance agency owner Nick Ramirez told BI.
Some progress had been made in recent months, Ramirez said. In August, Allstate agreed to temporarily halt mass non-renewals in California, although with a 34% increase in premiums, the LA Times reported.
That progress now feels in jeopardy, since multiple fires blazed through Los Angeles County neighborhoods on Tuesday, razing Pacific Palisades, Altadena, and Hurst, forcing over 30,000 residents to evacuate, and claiming two lives.
Ramirez and other experts explained how the destruction will likely exacerbate the crisis, jeopardizing the future of home ownership in California — even in regions outside of wildfire zones.
Insurance will continue to get more expensive for the whole region
For the lucky few who have secured insurance coverage in California in recent years, it’s come with sticker shock.
“I’ve seen numbers go up, 200%, 300%, even 500% in a year,” Ramirez said.
Now, even if your home is not directly in an area at risk of wildfire, the entire regions surrounding these zones will feel the increased heat of the situation.
Darren Nix, CEO of Steadily Insurance Company, explained that premiums will likely continue to rise for everyone, even if they are far from harm’s way. Residents of zones far away from the most risk of wildfire are still likely to see 15-20% annual increases in premiums, Nix explained.
“In order to come out ahead for California as a whole, it is going to mean that over time, rates are going to go up, even for the folks that are not wildfire exposed,” Nix said.
Residents seeking new policies throughout the region will also likely face more scrutiny when shopping around for policies.
“Each application in California is going to be getting triple scrutinized for how close they are to the nearest green space they are,” Nix said.
It may get harder for homebuyers to secure loans
The downstream impacts of unaffordable insurance options is it may make it harder to get a mortgage, Kevin Herzberg, a Los Angeles-based mortgage consultant, told Business Insider.
Mortgage lenders won’t lend on a house that doesn’t have some type of insurance, Herzberg explained, and if the consumer can’t afford the insurance, the home won’t sell.
“As insurance becomes less available or more expensive, fewer people qualify for loans,” he said.
Already this year 13% of realtors in California said in a recent survey they had sales transactions canceled because insurance was unaffordable or unavailable, Newsweek reported. That was double the 6.9% reported the previous year.
Californians scrambling to find new coverage have flocked to the state-run backup option FAIR, with active policies on residential properties jumping 41% from 320,518 in September 2023 to 451,799 in September 2024.
“They were supposed to be the insurer of last resort,” Ramirez said. Now, they’re the becoming one of the most important.
