“Sorry, America,

Your Insurance

Has Been Canceled”

The words were printed on an iconic Time magazine cover from 1986 depicting a bolt of lightning striking a distant American flag positioned at the end of a long road. They were frequently on my mind in 2023 as I planned content for our publication, and as I prioritized my own work schedule to deliver content about what I viewed as the year’s most important story: the crisis in California’s residential property insurance market.

My personal files still hold a copy of that Time article and the cover—a tattered black-and-white “Xeroxed” version of the artwork of illustrator Guy Renee Billout outlined by the red border of Time’s print editions, archived from the days before I became an insurance journalist. The industry-altering moment—a liability insurance crisis of epic proportions—was something my peers and I would report on for decades to follow.

Obsessed with the idea that Carrier Management would need to capture the current moment with a cover and content that would stand the test of time, and serve as a primer for future generations facing similar market crises, I recruited Insurance Journal’s West Coast Editor Don Jergler to write the cover story for our third-quarter magazine and Carrier Management’s Design Director Guy Boccia to imagine a memorable cover. A green “Leaving California” sign positioned in front of the orange glow of burning woodlands introduced the magazine, “California Insurance Market in Crisis,” and Jergler’s seven-page masterwork, “Are Winds of Change Blowing on California Insurance Law?“—my personal pick for the most important article we published in 2023.

My obsession continued as I spent hours upon hours of my 2023 workdays listening to the testimony of carrier representatives, agents, regulatory officials, consumer advocates, lawmakers and homeowners. This focus represented a departure for me and for Carrier Management, which reports mainly on broader national and international developments and leadership topics for property/casualty insurers. But it was insurance executives speaking at an industry conference in June that first pointed me in this direction. Asked about inflation trends, they segued to talk about their inability to raise rates as fast as reinsurers could, and ultimately ended up discussing the inability of regulators to keep up with the pace of change—centering their remarks on California, in particular. (Related article: “Regulatory Weaknesses, Politics Driving California Exits, Industry CEOs Say“)

It was the palpable sense of desperation in the voices of the homeowners that kept me engrossed in the developments in California’s insurance market—reviving memories of that March 24, 1986, article describing one of the most severe liability hard markets on record. In 1986, liability premiums doubled for some insureds and soared by multiples for others, mirroring similar spikes in jury verdicts. Capacity dried up for day care centers and other types of businesses that were prime targets of litigation.

Fast forward to 2023.

“Has anybody addressed the issue now at this point of getting insurance?” a distressed insurance agent trying to help a customer with no available coverage options asked during a four-hour California Department of Insurance workshop in July. Even a client living in a “concrete city” saw a premium spike from $2,000 to $4,000, while a more wildfire-exposed customer saw a fourfold jump to five-digit premium, she reported.

“Right now we are dealing with an insurance crisis on the condominium side. The price of insurance has gone up as much as 6,900 percent because the admitted market has stepped out of the picture,” a representative of a builder’s group said. “Our customers, the home buyers, are basically seeing their insurance rates go from $250 a month to $1,500 a month through their homeowners association dues.”

Six months later, reports from the Golden state sound similar.

“Our constituents should not be utilizing the FAIR plan as the insurer of first resort,” California Assemblymember Lisa Calderon, D-Whittier, said in December during her opening remarks at a hearing of the state Assembly Insurance Committee, which she chairs. “It seems our current market has altered the purpose of this safety net. This could have grave consequences if a natural disaster occurs,” she said.

“Our constituents need options. The more insurance companies issuing insurance policies, the better. Options are no longer available.”

“Our constituents also need stability. They don’t want to live in fear of being nonrenewed,” Calderon said, introducing Commissioner Ricardo Lara, who would aim to help the lawmakers to understand some aspects of his “Sustainable Insurance Strategy” announced in September.

“The status quo for our constituents is not sustainable,” Calderon said.

A representative of a homeowners association of 70 units in Pasadena offered a similar assessment near the end of the hearing. “You talk about this California FAIR insurance alternative like it’s fair and affordable,” she said. It is not, she suggested, citing a 2024 FAIR plan quote of $348,786 for a commercial fire policy. “We applied to 46 insurance companies in our desperate search looking for insurance…We are being canceled because of the fire risk, however, we’ve never had a claim for any type of fire risk in the 58 years we’ve existed,” she said, reporting that individual policies deem the units as “low risk” but the nonrenewing commercial carrier deemed the units collectively as “high risk.”

“I have an HOA board meeting tonight, and I have to explain why we’re going to be making a special assessment of $500 per household to help cover our cost for insurance,” she said.

Lara and his department are committed to modernizing California regulation to fix the market. But pricing relief isn’t coming until 2025, he told lawmakers before the HOA representative spoke.

Read Lara’s preview of 2024 in the related article: “No Lies or Sugarcoating from CDI; Availability Comes Before Affordability, Lara Says“