Rate Increases Would Hit Homeowners Already Paying 55% More Than in 2019
WASHINGTON, D.C. — As California’s FAIR Plan, the state’s insurer of last resort, seeks approval for an average 36% rate increase and USAA, the state’s seventh largest home insurer, requests to raise rates by 7% for nearly 350,000 customers starting in 2026, state regulators must step in and say no. The rate hike requests represent the latest blow to homeowners already trapped in an insurance crisis manufactured by private insurers who claim financial distress while reporting billions in profits.
The FAIR Plan increase comes as private insurers have systematically abandoned the California market, refusing to renew more than 250,000 policies from 2020 to 2023 and forcing record numbers of homeowners into the FAIR Plan, where policies have nearly quadrupled since 2015. As other states grapple with similar insurance availability crises driven by climate change and insurer withdrawals, California’s experience may foreshadow what is to come nationwide.
“California homeowners are being squeezed from all sides. Private insurers like USAA cry poverty while raking in record profits. They’ve dumped hundreds of thousands of policyholders into the state’s last-resort insurance provider that covers less and costs more. Now that provider is seeking a massive rate hike that will hit the families who can least afford it, while USAA wants to raise rates on 350,000 more customers. State regulators need to stop rubber-stamping these rate increases and start holding insurers accountable for the crisis they created by abandoning the communities and policyholders they are supposed to protect,” said Kyle Herrig, Unlocking America’s Future spokesperson.
The FAIR Plan rate increase request comes as California homeowners have absorbed a 55% premium increase since 2019. Major private property insurers in the state have either stopped writing new policies entirely or severely restricted new coverage in California. In 2023, private insurers issued fewer than 750,000 new residential insurance policies, the lowest number since at least 2015. The withdrawal has been so severe that some California ZIP codes now have no private home insurers willing to write policies at all.
The FAIR Plan was created as a safety net, but it has become a dumping ground for policies that insurers deem unprofitable. Because the FAIR Plan only covers fire damage, policyholders must purchase separate policies for other hazards, leading to combined costs more than double the national average. Industry data suggests that only about 60% of homeowners whose policies are not renewed by private insurers transition to the FAIR Plan, meaning thousands of California homeowners may have ended up with no insurance coverage at all.
Insurance companies continue to claim rate increases are necessary, but the numbers expose a more profitable reality. For every $100 California insurers collected in premiums last year, they paid out just $61.50 in claims to policyholders. Even when the Los Angeles fires caused significant underwriting losses in early 2025, the industry’s investment returns were twenty times larger. Until state regulators prioritize policyholder protection over industry profits, California homeowners will continue paying more for less while insurers post record returns.
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