Department of Insurance Expanding Coverage for Californians Who Need It Most

Review of wildfire catastrophe models paves way for insurers to close coverage gaps statewide for homes and businesses

An announcement from the The California Department indicates it had completed the review of three forward-looking wildfire catastrophe models, which will help stabilize insurance rates and increase access to coverage. Companies are already announcing they will expand in the state, helping to ease the insurance availability crisis caused by growing wildfires.

“For more than 30 years insurance companies have raised rates without guaranteeing coverage or committing to Californians. That ends now,” said Insurance Commissioner Ricardo Lara. “We are on time and on target for bringing insurance options back to all parts of California.”

What it means: Expanding coverage for Californians in wildfire-distressed areas

Under Commissioner Lara’s Sustainable Insurance Strategy, insurers utilizing Department-reviewed wildfire catastrophe models will be mandated to provide and maintain coverage in wildfire-prone areas. This will also assist policyholders in transitioning out of the FAIR Plan and restore consumer options statewide. The Department will begin accepting rate applications from insurers detailing their plans to write and maintain more homeowners and commercial insurance policies in the voluntary market. Mercury Insurance, Allstate, and CSAA were the first to respond that they plan to make filings – with more expected from other insurers.

“Only in California” requirement to write more policies: Wildfire catastrophe models have existed for more than 20 years, and every other U.S. state allows insurance companies to set their rates using this modeling. But California is the only state where insurance companies will commit to writing more policies in higher risk areas under the Strategy.

Thorough review with public input: The Department’s Model Advisor led an extensive and thorough six-month process to vet the integrity of wildfire catastrophe models that was open to public participation. The Department’s regulation provides a focused, transparent, and efficient way for insurance companies to utilize a model in a rate filing. The Department has completed its review of models from Verisk, Karen Clark and Company, and Moody’s – making all three of these models available for use by all insurance companies. View more information at the Department’s website.

Stable and sustainable insurance rates: Unlike public utilities, which are legally obligated to provide service, insurance companies have not been required to offer coverage under Proposition 103. For over 30 years, insurers have increased rates — often with the agreement of intervenors like Consumer Watchdog — without any obligation to remain in the market. Consequently, many insurers raised prices, withdrew from California, and left consumers with limited choices and soaring premiums.

Incentivizing wildfire safety to drive down insurance costs: Under the previous system of historical data, insurance consumers face rate spikes after major wildfires, with no recognition of the billions of dollars spent on wildfire mitigation. Wildfire catastrophe models will reflect the best available scientific data on mitigation efforts for the first time by homeowners, businesses, local communities, state and federal governments, and utility companies – helping drive down the cost of insurance. The Sustainable Insurance Strategy also builds on Commissioner Lara’s Safer from Wildfires regulation that introduced the nation’s first mandatory wildfire insurance safety discounts in 2022.

Staying on time and on track despite Los Angeles wildfires: Commissioner Lara opened the model review on January 2, 2025, which was days before the devastating Los Angeles wildfires. The Department has remained on time and on track while aggressively investigating consumer complaints from the Los Angeles wildfires, resulting in more than $67 million returned to wildfire survivors to date since January.