As California grapples with another season of wildfires, the impact on the state’s insurance market has become increasingly dire.

The reasons are numerous and complex: the rise in wildfires and extreme weather, high construction costs driven by inflation, high costs of capital, legal system abuse, and longstanding regulatory impediments.

Homeowners are understandably weary of seeing premium increases or — worse — policy cancellations after years of paying premiums. Insurers, meanwhile, are struggling to bring in enough premiums to pay claims and serve customers while maintaining a sustainable business.

The simple fact is that home insurance in California has been underpriced for a long time. Since 2013, California home insurers have spent an average of $1.08 for every $1 in premiums collected. CSAA Insurance Group, specifically, paid out $1.14 for every dollar of premiums received in 2023, and we had to tap into reserves to pay claims to our customers.

Multiply that ongoing reality — paying out more than what’s coming in — across most insurers and you have an unsustainable market. Insurers simply can’t continue to do business in the state if they are losing money, and if insurers continue to leave the state, everyone loses.

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