Southern California wildfires highlight home insurance industry
Southern California wildfires highlight home insurance industry
The wildfires in Southern California have put a spotlight on the home insurance industry. Companies are being confronted with massive new claims. This comes at a time when some insurers have reportedly agreed to sell new policies in fire prone areas.
LOS ANGELES - Insurers, who have reportedly agreed to phase in selling new policies even in fire risk areas, are confronted with massive new claims from clients who lost homes to the L.A. firestorms. But, different insurers pay claims in different and sometimes lesser ways.
Sam and Allegra Rubin lived in their Pacific Palisades home for 34 years. The first wave of the Palisades fire missed it. The second wave incinerated it.
Yet, Sam and Allegra feel very, very lucky. "I feel fortunate that I have insurance. My insurance was supposed to cancel on February 1st. Fortunately, it didn’t, and I was out shopping for other policies that would have satisfied my lender," said Rubin.

CALIFORNIA, UNITED STATES - JANUARY 8: A house in on fire as residents try to escape the site in Pacific Palisades, California, Los Angeles, United States on January 8, 2025. A fast-moving wildfire has forced 30,000 people to evacuate, with officials
Weiss Ratings, a well-respected company that grades and rates insurance companies, says Farmers Insurance and USAA denied payment on almost half of the claims they received in 2023. Insurers object, saying rating companies data over inflates the number of unpaid claims, since some claims are under the deductible or that the policy does cover such claims.
The L.A. Times quotes the rating company's CEO saying: "It’s not fair for me to say all these [rejected] claims were legitimate, but it’s equally unfair for insurance companies to claim they’re all illegitimate."
Consumer Watchdog President Jaime Court says this. "I think it's really troubling when you have two companies that are only paying 50% of the claims that are submitted. The industry standard is 37%. That's not very good either. But, over the course of time, these companies have consistently paid much less than the other companies; 12%, 13%," said Court.
Ann Mitchell lost her Altadena home as well as her small jewelry shop. Her private insurer canceled her a while back, forcing her to find an alternative. "I have a new insurance agent. She said, 'I think you just have to do the FAIR Plan because it's the only thing available. I just don't really see, just with prices, that I'll be able to rebuild the house in a similar way,’" said Mitchell.
The Insurance Journal, a trade magazine, reports that the California Fair Plan, has $377 million to play claims plus $5.75 billion in insurance it bought to cover mass disasters. If true, the Fair Plan has just over six billion dollars to pay claims.
The Los Angeles fires alone could cost $8 billion. to say nothing of the rest of the state. But does it have even that much? "I've seen what the analysts say about those contracts, and if you add it all up, it's only $2.5 billion that they have access to without spending their own money," sais Court.
If insurers have to make up the difference for this and future fires, Consumer Watchdog says the Insurance Commissioner wrote a memo saying it's OK to pass that on to all of their policyholders.
Rubin sums the damage up like this. "It's like a battlefield without the bodies."
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