With California’s insurance crisis at an impasse, it might be time for a different approach

Nobody really likes writing those premium checks to insurance companies that always seem to be increasing — until they need their insurance to cover losses from auto crashes, fires or other calamities.

The conflict between those two priorities has been particularly acute in California in recent years as a series of horrendous wildfires swept through the state, taking lives, destroying billions of dollars in property and disrupting lives — even of those who escape direct losses.

Californians spend more than $100 billion a year on what the industry calls “property and casualty” policies, according to the state Department of Insurance.

Bills for fire and homeowners coverage topped $19 billion in 2025, but thanks largely to the destructive fires that hit Los Angeles and its suburbs 22 months ago, insurers incurred more than $31 billion in losses on those policies — more than four times the losses in 2024.

As payouts mounted over several years of wildfires, insurers began either pulling out of the California market or imposing tighter restrictions and higher premiums, forcing millions of property owners to scramble for coverage mortgage lenders require.

The state’s last ditch “FAIR plan” was deluged with applications for coverage that was both costly and minimal, putting its finances in jeopardy.

It was — and is — a genuine crisis, needing a solution that provides consumers with adequate coverage at affordable prices and makes insurance profitable enough to keep insurers in the market.

After the Legislature failed to come up with a solution, Insurance Commissioner Ricardo Lara weighed in three years ago with a plan he said could advance both priorities, allowing insurers to base rates on estimates of future losses, rather than past experience, while requiring them to meet coverage quotas.

Lara has taken heat from consumer groups, such as Consumer Watchdog, accusing him of caving in to insurers.

Oddly, however, the industry and consumer groups forged a strange bedfellows alliance this year to oppose a scheme Gov. Gavin Newsom proposed, limiting the liability of electric utilities such as Pacific Gas & Electric when their transmission lines fail and spark fires.

Without such limits, utilities argued, their financial stability would be undermined, making it difficult for them to borrow money and attract investors. The plan would, in effect, shift more of fire losses to insurers or property owners.

However, adding utilities’ liability to an already dicey insurance coverage crisis was too much to swallow, and as the legislative session ended that plan remained on the table.

Lara could not run for another term, and the election of his successor this month adds still another factor to a situation already fraught with political complexity.

Two Democrats, former San Francisco Supervisor Jane Kim and state Sen. Ben Allen, finished in the top two in the June primary, putting both on the Nov. 3 ballot. Their duel took on an ideological aura. On the left, Kim proposed that the state set up its own fire insurance system, while Allen, a moderate, said Kim’s proposal would cost too much and the state should build on Lara’s plan.

Kim won decisively, one of many political races that progressives claimed this year. Her victory sets the stage for another legislative struggle.

Kim’s notion of having the state directly provide at least some coverage is not particularly novel. The state already has an insurance program for workers’ compensation, and it offers earthquake insurance.

Nor is it fatally unworkable, as Allen and the industry contended. Having base coverage provided by the state through taxes or mandatory fees tied to property value — and backed by reinsurance — could, if designed adroitly, protect insurers, utilities and consumers from the economic jolts of catastrophic wildfires.

At the very least, it warrants an independent and authoritative examination.