Ponder a $44,000 insurance bill. This does not count as inflation in the CPI.
Dysfunction in California’s Insurance Market
The Wall Street Journal reports A $44,000 Bill Shows the Dysfunction in California’s Home-Insurance Market
Glenn and Lorraine Crawford paid about $500 a month to insure their home in Agoura Hills northwest of Los Angeles when they bought it in 2012.
The Crawfords say they have little alternative but to pay the bill that arrived last month, which, at more than $44,000 a year, is almost as much as their mortgage bill. The only other insurer willing to cover their home, Lloyd’s of London, quoted them $80,000 a year.
More than a year after infernos tore through Los Angeles County, millions of Californians like the Crawfords are suffering through a home-insurance crisis that has rolled on for years with eye-watering rate increases, canceled policies and rejected claims.
Two of the biggest insurers, State Farm and Allstate, aren’t selling to new customers in the state, despite getting double-digit rate increases approved for their existing policyholders. A third, Farmers Insurance, has committed to cover more homes in fire-prone areas, but only a fraction compared with the drop in its overall number of policies since the crisis began.
The insurance dysfunction has spread to California’s housing market, the country’s biggest and most expensive, with nearly one-in-five real-estate agents reporting a canceled sale last year because of clients unable to find affordable insurance, according to a survey by the trade body California Association of Realtors.
The roots of California’s insurance crisis go back years. The state’s tough rate caps kept premiums low. But home insurers eventually balked, saying they couldn’t charge enough to cover rising wildfire and other losses, made worse by climate change and development. Insurers didn’t renew tens of thousands of policies, especially in fire-prone areas.
California’s uphill battle to draw insurers back could prove a template—or cautionary tale—for other disaster-prone states. New rules implemented last year, for instance, require home-insurers in the state to pledge to sell new policies in high-risk wildfire zones, in return for allowing them to charge higher rates.
As part of a request for a 6.99% rate increase, Farmers, the second-biggest home-insurer in the state, pledged to add at least 5,596 policies in high-risk areas by September 2028. That is less than a 10th of the 59,806 reduction in Farmers’ total number of California home-insurance policies in the previous two years, according to a Consumer Watchdog analysis.
Others continue to shun the state despite winning big concessions. California regulators approved a 34% rate increase for Allstate in 2024. Yet it has no “growth aspirations” in California home insurance, Chief Executive Tom Wilson said last year, adding that it would take time to fix the market. A spokesman said that remains Allstate’s position.
The disaster also almost felled California’s biggest home insurer, State Farm General. Lara last year backed an emergency 17% rate increase to keep the State Farm subsidiary afloat. “We’re on the Titanic, and we see the iceberg,” one of Lara’s lawyers told a hearing last year.
Truflation BS
Meanwhile, Truflation reports an absolutely absurd year-over-over year inflation rate of 0.87 percent.
Faster Nonsense
Truflation is nothing but more timely nonsense. Like the BLS and BEA, Truflation does not factor in homeowner’s insurance or property taxes.
Truflation’s measure of rent are ridiculous. Truflation has too high a weight on new leases rather than existing leases. Existing leases are close to 90 percent of the market.
While the price of new leases is falling in some areas, existing leases are moving much slower.
Neither the BLS nor BEA weigh food properly. I strongly suspect Truflation doesn’t either.
I don’t doubt that Truflation has better and more timely collection methods than the BLS, but like the rest of the inflation models, it’s nonsense.
Economists don’t understand why people are upset. The answer is obvious. When you exclude real prices people pay, all you are offering is garbage.
We don’t need better measures of nonsense, we need better measures of reality, and Truflation sure isn’t it.
Food at Home vs Away
Note the BLS food weights for home vs away are reversed from where people actually spend their money.
For more details, please consider Where Do You Spend Money on Food? How Screwed Up Are the BLS Weights?
Does the BLS match your budget?
Homeowners Insurance
On August 11, 2025, I asked Is Homeowners Insurance Understated in the CPI? Shop Around!
Our Insurance went up by $2,000. Then another $2,000. Here’s our story.
What’s the Insurance Weight?
The BLS says shelter is 35.473 of the CPI. Of that, Tenants’ and household insurance is allegedly 0.414 percent.
Sound right?
If you own a home, what percent of your income is spent on your homeowners’ insurance?
Under 1/2 of 1 percent?
ON January 14, I noted The Fed Has Missed Its Inflation Target on Ten Different Measures
The Atlanta Fed tracks various inflation targets. Let’s have a look.
Does that match your experience or does Truflation?
And none of the measures include homeowners insurance. It’s all nonsense, yet economists believe it.
With real estate, you rarely get the chance for a complete do-over after a catastrophic damage event like the Camp Fire and Eaton Fire in California. When given that chance, the time is right to make hazard mitigation changes during the rebuilding phase. Example: Greensburg, Kansas was leveled by an EF5 tornado almost 20 years ago. In their reconstruction the town prioritized renewable energy and sustainability for public buildings and infrastructure. There was no practical way to do these things as retrofits because they wouldn’t pass a cost-benefit analysis for the construction expense. After the disaster, local officials want to rebuild with better resilience, but unfortunately are dissuaded by the building industry, usually saying adding code requirements will slow rebuilding, are too expensive, and the people have already suffered enough and just want to get on with their lives. In reality, many highly effective hazard resilience activities do not add any significant time and may add no more than 1-2% to the construction cost. For example, ember-resistant vents in wildfire zones. Many homes burn from the inside out because embers are blown into attics and other enclosed spaces. In the wake of the Camp Fire, Butte County officials waived consideration of requiring ember-resistant vents and other code changes. Homeowners need to demand resilience from their builders.
According to Zillow, Mr Crawford’s house is 7,081 sq ft and currently valued at $3,315,300.
So while a $44,000 quote for home insurance might seem high, that’s the price you pay to play in the big league — oh, and deciding to live in an area zoned for fire risk?…bad idea.
Pro Tip: Insurance companies have to pay claims out of the premiums they receive, they do not have access to the money printing machine at the Fed.
…and his property tax is $27,000 per year…rich people problems. Did you hear, the Dow just hit 50,000? That’s how these people afford to live…if and when Mr. Market does meet its comeuppance, people like this are going to get smoked.
Incompetent Gavin Newsom recklessly makes Californians too rich to afford insurance,
Ahhh the ugly rich people….they want the state to pay for their insurance…..let the poor eat insects.
isn’t believing bad things about people you don’t know classic bigotry?
and what is ‘rich’-? we’re all in an economic continuum, and as Lincoln explained to the democrat slave owners, we’re not fixed in place in a free society. don’t you desire to become affluent and have something to leave for your children?
to a man worth seventy million dollars, a man worth five million dollars is a piker. compared to you and me living in America with clean running water, etc., third-world millions pulling drinking water from their toilet stream…
we’re both freaking rich.
I suppose you disapprove of profits, because they’re ‘selfish.’ but doing valuable work people want or need and are willing to pay us for is how we feed our children.
do you want to leave feeding children to the government? do you want to rob ‘rich’ people to feed the spawn of welfare moochers? we won’t have any more rich to create jobs…and we’ll be even deeper into our arm pits with hungry moochers.
I’ll bet you’re a democrat. I’ll bet you’re gushing with self-righteous disdain that ‘he doesn’t get it’ that holding good feelings is what’s important, and if our touchy-feely virtue-signaling policies create mass starvation and suffering, well, who’ll be alive to blame us for our short-sightedness, spinelessness, and mental inertness?
preen-on, Petey. everybody’s doing it.
California is a special case. The government does nothing to reduce the risk of brush fires and the cost to rebuild is very expensive (not just for building but all of the legal and regulatory costs). The insurers do not want to have too much exposure to the state because they do not see the situation changing anytime soon. You are a fool to purchase real estate in California. BTW, the palisades reservoir is still bone dry…..
Yes, lazy Trump never rakes his forests.
The insurer calculated the “replacement cost” for my home to be about 10% greater than the market value of the house, and about 20% greater than the house less the land.
the headline says one in five sales cancelled. did I read that actually one in five real estate agent reported a single cancellation last year?
wtf indeed. wtf.
Well, if they won’t leave one way, they’ll be forced to leave another. Right?
If you want fire and flood protection for your home, build it out of a cave up on a hillside.
https://www.gettyimages.com/photos/cave-houses
Seen 48 yrs. of L.A. wildfires. Eaton and Palisades fires were unprecedented catastrophic losses, like the 1994 Northridge Earthquake was. Companies dropped EQ insurance afterward. Policies are now through CA Earthquake Authority. The 1906 San Francisco earthquake lead to the financial panic of 1907 and the JP Morgan bailout. Six years later the FED was created.
The LAFD is about the same size as it was during the 1960’s, despite a huge increase in population since then. Funds are also lacking for maintenance and replacement of equipment. LAFD is seeking a 1/2 cent increase in the city sales tax.
Brush fires are preventable. JPL was fine because they had a working reservoir and the brush was cleared to create a fire break. Altadena had brush right up to the houses. There was no fire prevention to protect that town.
Funds are always lacking here in CA because the public unions get too many excessive raises and are paid too much in base salary + benefits.
Then there is our Prop13, which limited the tax that could be collected from all properties, from primary residential to vacation to rental, commercial and even undeveloped land, all of which has helped the price of housing soar over the decades since this passed. Of course, soaring home prices mean all the local prices and services also jump in tandem with rising home prices, which leads to everyone, including unions, demanding larger than usual raises and base salaries to compensate, which then cause prices to continue to rise, all justified by the concept of a “living wage”..
With government limited in the percent they can increase property taxes, they compensate by supporting home price increases, which brings in the revenues they want even if they are limited in the percent that they can charge. And where there is still a shortfall in revenue, well, they then turn to increased sales taxes, more bond issues and umpteen fees.
In 2020, Prop 19 passed and put some limits on Heir transfers of property, which caused Heirs in many cases to lose much or all of the tax reduction that their parents or grandparents may have held on their homes.
So now there is an initiative trying to get signatures so as to appear on the Nov election ballot that would repeal the part of Prop 19 that limits the tax-base exclusions on inherited property, because greed only grows. Hopefully, this doesn’t gain the signatures needed.
Meanwhile, FL is looking to reduce or eliminate property tax for many homes. They will rue the day they did this if they succeed.
In conclusion, it’s not “inflation”. (“…always and everywhere a monetary phenomenon”)
natural disasters and insurance—one has three choices —live where natural disasters are rare-Self insure your property or pay the insurance premium
Ive been in ca for 14 years or so now. Guess there are lots of reasons for high insurance rates.
My area gets about the same amount of rain as where im from in sc. it just the time is different. Oct to march. Summer has 100 plus temps and 7 percent humidity. Ive lived a lot of places. Ive never seen oak trees look thirsty till i moved here. The wetter the winter the more everything grows the bigger the fire when it burns.
.
The insurance cartel makes the drug cartels look like pikers. All lies, grifting and sociopathic level greed.
https://www.justice.org/resources/research/insurance-industry-is-quietly-making-record-profits
None of that matters, because Californians will continue voting into office the type of people who created the dumpster fire that is now that entire state. Let them implode and self-immolate.
Like the United Staes of America is not in a dumpster fire because of the type of people MAGA elects.
‘We are only programmed to receive.’
“You can check out anytime you like, but you can never leave.”
“Glenn and Lorraine Crawford paid about $500 a month to insure their home in Agoura Hills northwest of Los Angeles when they bought it in 2012.
The Crawfords say they have little alternative but to pay the bill that arrived last month, which, at more than $44,000 a year, is almost as much as their mortgage bill.”
One wonders what their annual mortgage was back when their insurance was
$6000/yr. Based on the picture and what is known, I would be inclined to think that their insurance was a bargain in 2012. If they had started from a more realistic point and expected proportional increases relative to house price increases there wouldn’t be much room to be shocked here.
People have insurance because the own (or a bank owns) something that they cannot afford to repair or replace. Consider vehicles – mechanical repairs either used to be done out-of-pocket or you discarded the vehicle and picked up a different one within your means. Now, there are multiple companies that ‘pay the repair shop’ if you buy their policy because a growing number of people can’t afford to repair or replace a vehicle on their own. A lack of affordability combined with ongoing currency collapse shouldn’t be overlooked in this case. As with health insurance, the property insurance industry exists to make a profit.
The California government did not maintain forests due to climate concerns and created very poor fire conditions. The fires then hit much, much harder and insurance companies had to cover. Now the cost is passed to other insureds in the state. Once again, incompetent California governance screws the people over.
Just wait until gasoline prices in California hit $8 before the end of the year. Keep the good times comin. That’ll really spike inflation for everything.
The federal government is responsblie for nat forest blm
No they’re NOT. They only help pay for it. California has refused to take care of their forests since Ronald Reagan was Governor. Look it up.
That is a bunch of BS. There is no commercial timber in Southern California. The federal government owns over 50% of California and most of the commercial timber. So it is the federal government which sets policy for timberlands. No one clears brushland because the cost to do so is prohibitive whether in California or Texas (where they had large wildfires also but it didn’t hit populated areas).
Interesting point here, the Federal govt is not supposed to own land except for very specific purposes. They got around this by making it a condition for statehood in a number of the Western states — is my understanding.
Donald J. Trump and private owners own the lion’s share of trees in California. How many acres of federal land has Trump “raked”? LMAO. You folks just have no clue how much money would be required to have California’s vast terrain “fire proofed” each year. The shit grows back in massive quantities when it rains and the sheer size of the acreage would require a gigantic investment in machinery. Incompetent governor my ass.
The house on the picture looks like a $2 million house. It is in an upscale neighbourhood, at least Google says that. Google also says that it is high risk of fire area. Is paying 2.2% insurance too high under these circumstances? I don’t know. My sister has a summer house in Europe right next to a river in a valley. No insurance company wants to insure it not even for the risk of fire only.
It is quite obvious that poor fire prevention measures in California are pushing insurance costs higher. I still remember the case when local electricity distribution company didn’t clear land under high voltage grid and then there was a very large fire.
Agoura Hills people elected an independent candidates for their city councel but in presidential elections they backed Kamala (Trump was better of the two eviles is my take). They elected GOP back AG for their district. It seems that the residents start waking up.
You have no idea what a $2 million house looks like in CA. That 7k sqft house in that area is in the $5 million range.
Caveat – AI generated figures. Premium as % of rebuild has gone up from about 0.15% to 0.9%. This would reflect an implied loss frequency moving from once every 660 years (4.5%) to once every 222 years (12.7%). This likely reflects both a physical risk (fire/flood/mudslide/quake) and re-build inflation
“This would reflect an implied loss frequency moving from once every 660 years (4.5%) to once every 222 years”
It is mind-boggling to think about the housing stock from the past 40 years lasting to the turn of the century. Veneers, drywall, and other cheap materials don’t hold up well compared to stone, plaster, and hardwood.
100 years ago no one had homeowners insurance, now it is nearly ubiquitous. Insurers are no longer able to easily protect the bottom line by writing new policies (growing the pool) so they must seriously re-value what they offer. All those Midwestern houses getting new roofs for cosmetic hail damage hasn’t helped either.
Veneer, drywall etc isn’t covered from wear and tear. That’s your job as a homeowner to replace it when it wears out, not insurance’s job.
The point is that modern houses in the U.S. are low in quality (both materials and construction) and won’t last like 18th/19th century houses have.
Matchstick frames in order to maximize enclosed space with a minimum of material (also enhancing the ease with which the roofs can be peeled off), poorly-insulated exterior walls, and basements that aren’t water-tight are a few common problems. They will be a veritable Ship of Theseus well before the year 2200.
What was an average of ~500 homes lost per year in Southern California from about 1950–2000 (CalFire 2000) has recently climbed to ~2700 structures per year statewide from 2000–2018 (Syphard and Keeley 2019)
Lets go with the 2700 statewide figure and rule out the “natural” number of house that burn every year. Lets assume a one million dollar average claim per house brings us to 2.7 billion losses per year. There are 14 million homes in California, but lets go with 10 million for effect. This comes out to only $270 per unit per year to cover damages.
Even if you double or triple these numbers it would only be a $1,000 a year average premium increase. All of California is approaching fire hazard status, earthquake status, or flood status.
Not sure if modest homes are subsidizing expensive homes, or visa versa, but spread out it does not seem like a catastrophe. For the individual it is definitely a catastrophe. Perhaps reinsurance needs to spread out risks more than it is already. Perhaps damage caps could be enacted with additional insurance carrying more of a premium.
Sorry, but this type of ‘analysis’ shows why most people don’t understand insurance markets
“Lets assume a one million dollar average claim per house brings us to 2.7 billion losses per year.”? Last year’s insured losses alone were $20-25 billion just for the fires in Los Angeles, not the rest of California for the year.
And that same type of catastrophe (after draining all the insurance trust funds and reinsurance amounts) could happen again this very next year – between earthquakes, floods, fire, etc.
When people don’t recognize these ‘true’ costs, they’ll never recognize what insurance actually should cost. Don’t like it; don’t buy it.
You make a good point, but also reinforce one of mine. Are lower cost neighborhoods subsidizing higher priced neighborhoods. Those same said homes burning down in Bakersfield would have lower cost losses.
Also I stated….”Perhaps damage caps could be enacted with additional insurance carrying more of a premium”
People understand how insurance works. It is a mess.
As another reader commented….”Folks need to wake up to the fact that homeowner’s insurance isn’t there to protect them, it is there to protect your mortgage-holder and the insurance company’s shareholders. It is designed to protect the wealthy far more than middle-class folks.”
You should ask your own insurance agent some more direct questions; it might help your own future finances.
No, lower cost neighborhoods are not subsidizing higher priced neighborhoods. And yes, there are already “damage caps” in every single insurance policy.
With private homeowner’s insurance, you get to choose what policy limit (or damage cap) you want (ex – $300K, $750K, $1M). Want higher limits? You obviously have to pay more premiums. If your damage is more than the policy limit, the insurance company only gives you what you paid for.
You can also reduce what coverages you pay for (ex – yes or no on jewelry, high or low for liability on personal injuries on your property, yes or no on earthquake or flood insurance, etc.). And then you get to choose your own skin-in-the-game deductible amount.
In the end, private insurance in a market has options. But no, there is no guarantee that some company will provide catastrophic insurance coverage for you at some low rate you used to pay, just because you want that lower rate back.
Insurance is not “a mess”. It’s just statistical probability for peace of mind. And full peace of mind should cost a lot.
“Then last year, burglars stole more than $250,000 in family jewelry, cutting into the Crawfords’ gun safe….“We’re not uber rich. We’re not Kardashians,” Lorraine Crawford said. Lol from the deck of her 7000 sqft home worth order $5M.
I doubt she is to suffer any hardship if they have wealth like that stashed. Me , I only insure the building, the contents are disposable, although the loss would hurt.
Why do Americans put up with this shit.
It makes one wonder why someone would publicize all that. If you were to check Google Earth would you see a giant bullseye painted on the house’s roof?
Need a “personal articles” policy. Each item needs to be scheduled, typically with diamond rings, for example, an appraisal is required for the underwriting. Did agent / broker mention?
Or better yet, rent a safe deposit box for a few hundred dollars a year for Gods sake.
Just go visit your box once or twice a month to rotate out jewelry based on what you want to wear.
45k insurance on a 5 million dollar home is super cheap. It says they expect a total loss once every 100+ years.
Two cars in every driveway. How quaint.
Lots of people are happy if a storm damages their roof and they get a free roof replacement in the short term – since they have paid for insurance.
The problem you’re seeing here is a problem of inflation, which, as we know is always and everywhere a government phenomenon.
In the long run, increasing the supply of money in other words inflating the supply of money causes prices to go up. They went up a lot recently due to spending due to the response to Covid. There have been attempts to cut money spending, which I believe have been voided by courts since the legislative branch approved the spending.
Now we see the price of construction work being incredibly high after those few years of Covid spending. So now we see the insurance premiums increasing accordingly. What else could we expect?
I cannot believe that my Father-in-Law, barely able to reason now, has State Farm as his insurer of his nearly $1Million home….they told him: “DO NOT DARE TURN IN THAT THEFT OF HIS WIFE’s JEWELRY ($70K) or they will cancel you!”
We got out in 2009 before the insanity started. EVEN THEN, it was never a reasonable place to live cost-wise.
He should have called their bluff for 70K. I absolutely would have.
I live in California and I am NOT a MAGA conservative. There are two major issues in California that show that Newsom is NOT the right Democratic candidate for president next cycle.
The first is the one mentioned. The entire homeowners insurance problem in California was created by the insurance commissioner (not allowing increases, basing any increases on an average of past claims experience instead of forecasting future claims experience, and actually funding the group that claims to represent insurance holders to file objections to increases). All of this was either encouraged by Newsom and/or Newsom did not object to these poor policies. Insurers want out of California because the insurance commissioner cannot react fast enough for any rate increase request and the odds of it being approved are poor. California initially turned down State Farm’s rate increase request saying it was too high of an increase while simultaneously telling them to increase their capital because they were losing money. I actually think that the insurance commissioner is sitting on rate increase requests to force more homeowners into the state “fair” plan, increasing the rate base of this plan. The state would rather me pay 5X more to the state “fair” plan to 2X more to State Farm. I am anxiously awaiting to see if I get canceled or renewed for my next policy period. I will find out in the second week of March. There are fifty different companies that write homeowners insurance policies in California. That is enough competition. The cure for high prices is high prices.
The second issue is that the governor caused two refineries to shut down in California due to his hare brained scheme of trying to tell the refineries how much inventory to keep on hand and a lot of other micromanagement. California (and governments in general) cannot react fast enough to changing conditions and no one wants to continue to lose their own money waiting for the state to make a decision. And while I (unlike Mish) agree with the climate change thesis it is useless to fight this on a state basis. It needs to be a national/international effort and unlike what has been done in the past, alternatives need to be READY before hydrocarbons are reduced, and the low hanging fruit with low cost to benefit ratios needs to be picked first.
But Newsom does so well touting CA High Speed Rail.
Folks need to wake up to the fact that homeowner’s insurance isn’t there to protect them, it is there to protect your mortgage-holder and the insurance company’s shareholders. It is designed to protect the wealthy far more than middle-class folks. Here’s an idea, make the mortgage holder (bank) reponsible for paying 50% of the insurance premium + 100% of increases over time (less inflation). What will immediately happen is banks will stop lending in high-risk areas like California hillsides and Florida beaches. Overall insurance rates will collapse for prudent middle-class folks (takers in Republican parlance), who will no longer be subsidizing their wealthy (makers) overlords. The guy in the article is upset because is $45k insurance is almost his $45k mortgage. If you can afford a $45k mortgage, you really need to stop being a whiney little bitch. What kind of moron spends $540k PER YEAR on a stupid house?
1) Try to read more slowly and surely; the $45k for insurance and mortgage were expressed in yearly terms already;
2) “homeowner’s insurance isn’t there to protect them”? It’s your own private home; go insurance naked if you want. But asking a private bank to pay your insurance is silly;
3) you do realize you’re posting on an economics blog, right?
Not true. My Father-in-Law’s Million plus home is insured but he cannot make any sort of small claim (less than $250K) and if he does, he will not be renewed. HE IS TRAPPED. We are gonna get stuck with it when he passes. I hate Cal.
Just leave the coffee pot on once you inherit it and you’ll be fine 🙂
If the buyer can’t get homeowner’s insurance there won’t be any lending in that case either. I am for the free market insurance costs to push consumer behavior to avoid risky areas.
The people hurt are those who bought prior to the risk changing, like me. However that’s life. If insurance is unavailable or unaffordable then I will take a hit to the value of my home and perhaps go without insurance.
I don’t have a problem with the California “fair” plan being a bridge for 1-3 years to find other insurance providers and to let the homeowners insurance market to stabilize (i.e. rise to meet the risk) but it is going to morph into a permanent fixture.
“The people hurt are those who bought prior to the risk changing, like me.”
Not sure I understand your logic here. If you faced ‘low’ insurance premiums the past couple of years before this new premium push, you benefitted monetarily. The risk of loss was still there, but you were being protected by CA state insurance policies (even though you like the “free market”). Now that the state is allowing premiums to go up (or closer) to the actual risk-adjusted cost of ‘true’ insurance, you are paying ‘real’ insurance rates now, but not in the past.
Don’t envy those people now trying to sell their homes in these Wildfire areas.
Massive Insurance costs will lead to even more Fire Sale prices.
The title may be misleading, as “with nearly one-in-five real-estate agents reporting a canceled sale last year” it is one in five agents, not homes.
It is time to abandon the idea that middle class is a lawn, and class trivia pursuits and instead puting in food gardens and do fire proof DIY retrofitting of your house if you have a house. Retirement is becoming more practical activities. Wake up laggards in America no one else is going to take care of you. Note the hands in pockets and leisure class demeanor of the guy in the picture that we are supposed to feel sorry for.
interesting
I just got my electric bill today, which included a chart comparing this year to last year. I used less kilowatt-hours of electricity this month compared to last year, but my bill was 33% higher this year — and supposedly energy prices fell over the last year. Straight up gouging is occuring.
Guess what you’re electric bill is going to be when 100+ electric hungry new data centers come online.
Guessing there are going to be a lot of ‘fires’ at those new data centers caused by angry mobs.
Paying for Big Brother to spy on you!
Trumpian economics…
Does it show a “Delivery Charge”? Mine was higher than the cost.
“Existing leases are close to 90 percent of the market.”
Thank you for highlighting this fact, which most of the media gloss over, or even hide.
Maybe time to move on from XIX century and start building houses like it is XX! century now. Get rid of all those wooden parts, start using brick/concrete like they do in Europe and fire/tornado/hurricane damage risk will drop significantly.
When family from Europe is visiting me here this is a must to just drive to any construction zone and show it to them. They cannot believe it until they see.
And they teach The Three Little Pigs story in 1st grade already, but nobody learn.
Lumber lobbyists would never allow this.
Where do you see new homes being built of wood?
They don’t build them with wood in Florida or most of the southern states. Old existing homes might have been built that way but nothing in the past 25+ years.
Here is CA! They are building a massive new apartment complex a few blocks from where I live. About 6 stories. All framed out in wood.
I should have said that the apartment areas on the 2nd through 6 floors are framed in wood. The 1st floor (retail area) and sub-basement garage are all done in reinforced concrete.
Also, there is the new high-strength wood. They built a complete office building with this wood in the county government seat and completed it last year.
not sure where you live but most of USA is absolutely wooden structure. They can put some form of stucco or brick siding which is not fully wooden but internal frame is wooden, your roof under shingles is also made of plywood sheets, door frames are wooden, 2 by4 everywhere. I Europe main frame is like cinder blocks or bricks.
In Florida I think change of building code was done after Andrew hurricane and 1st floor is mandated to be made of brick/concrete. This actually show that it is doable, just nobody is doing right thing, which is put such code nationwide.
Lots of apartment complexes are framed in wood here in Florida. I am a native and have lived here for over 70 years. Many single family homes may have concrete block structure for the first floor, but most 2nd stories are built with wood. All roof trusses are wood.
Florida home insurance is equally an increasingly unaffordable mess
If you dont have an updated roof good luck even getting insurance.
No worries. FL is trying to remove property taxes!
The pain in California is only just beginning. Massive deflation event coming in real estate while a hyperinflationary in everything else. Interesting times. Americans, unlike literally every other developed country, have never experienced a currency crisis/collapse. We are arriving at the same place the Former Soviet Union was in 1990. Hedge accordingly.
The currency collapse is long overdue . I wonder how it has been elevated ( $USD ) for so long . What will the gold bugs trade their gold for is a question I’ve always pondered . My thoughts are that the USD only retreats to about 30 on the index . The panic will certainly be something to behold as she marches down . I cannot think that gold will NOT soar , but what then ……. buy a file and scale to purchase things . As always the best play is for farm land with water rights . Please excuse my off point / subject ambush .
Agree, but the USD is the best smelling piece of dung in the pasture.
Other countries will have sovereign debt collapses before we do. Probably starting in Japan and Europe. Why do you think the European countries are so anxious for war?
Those numbers are crazy!!!
As somebody living in Australia which has faced more significant and century long fire risks, I do wonder if the actuaries have long unquoted and now they are over quoting for the cost of insurance.
Either way even if they have overshot. The insurance cost is what it is and widespread reform is needed.
Down here in Australia we have a policy and education of DEFEND your own home from fire. The best defence is prevention by creating firebreaks, well watered gardens around ones home and a fire resistant home. (eg low flamable exterieriors, a water source and a firepump that isn’t reliant on external infrastructure.)
We can always do better. But our country has been battling this threat for 150years. A few lessons could be learnt from AUS.
Actuaries have to forecast into the future. That includes inflation costs, investment returns, and the overall increase of risk due to climate hoax: fires, floods, hurricanes, etc.
They also have to make a profit otherwise what’s the point? All of those things are factored in and probably a few things arent such as the demographic death spiral the United States is in now.
That is all true. But actuaries are not wildfire or climate specialists. Most of their forecast are based on historical data with a few tweaks where the future might vary from the past.
The massive changes reported here in insurance rates unlikely reflect a SUDDEN change in actual risk. More likely they partially reflect a change in actual risk and price in the recent historical risk which is likely an overshoot.
To think that the actual fire cost risk has risen by approximately 100x is ludicrous. They were under pricing previously and now they are likely over pricing.
(If their models only consider 5-10years rather than a 50 year timeframe for wildfire then naturally the occurrence of an extreme event will distort their pricing.)
Here’s Gemini’s answer to why insurance rates in Cali are so high.
As of 2026, California’s home insurance market is undergoing a massive, painful transition. While the state historically had some of the lowest insurance rates relative to home value in the U.S., a “perfect storm” of climate disasters and outdated regulations has caused premiums to skyrocket recently.
The situation reached a breaking point following the devastating Los Angeles wildfires of early 2025, which caused over $22 billion in insured losses and triggered a new wave of policy cancellations.
Here are the primary reasons your rates are so high right now:
1. The “Reinsurance” SurgeInsurance companies buy their own insurance (called reinsurance) to protect against massive catastrophes. Following global climate events and California’s recent fires, reinsurance costs have spiked. Until recently, California law prevented insurers from passing these specific costs on to consumers; however, new 2025-2026 reforms now allow them to bake these costs into your premium to keep them from leaving the state entirely.
2. Catastrophe ModelingHistorically, California forced insurers to set rates based only on past losses (looking backward). Under the new Sustainable Insurance Strategy implemented by the Department of Insurance, companies can now use forward-looking AI and catastrophe models. While this helps keep insurers in the market, it allows them to charge much higher rates for homes in areas the models flag as high-risk for future fires.
3. The FAIR Plan CrisisThe California FAIR Plan (the “insurer of last resort”) has seen its policy count more than double in recent years. Because it has taken on so much risk, it is seeking average rate increases of nearly 36% in 2026 to stay solvent. If you are on the FAIR Plan, you’re likely seeing some of the steepest hikes in the state.
4. Construction & Labor InflationThe cost to rebuild a home in California has outpaced general inflation. High labor costs and the price of materials mean that even if your home’s value stays flat, the replacement cost (which determines your premium) has gone up significantly.
5. Regulatory “Catch-up”For years, the state suppressed rate hikes to protect consumers. However, this led many major carriers (like State Farm and Allstate) to stop writing new policies or leave. To lure them back, the state has recently fast-tracked “rate-filing” approvals. In early 2026, companies like Mercury and CSAA were granted rate increases as part of a deal to remain in the market.
Thanks for your post and use of Gemini here (everyone else could find this same info if they actually wished to learn)
Everyone has an opinion of what’s happening with insurance (as seen above). But the financials of insurance is fairly straightforward and the economic theories backing it haven’t changed.
$22B in insurance losses in a specific insurance pool will change the financial math for future insurance policy premiums. Those other reasons Gemini provided are simple economics. People that studied this knew these issues might probabilistically occur and they did almost simultaneously.
If people don’t do their statistical homework, they might be blindsided in the future. Hard to educate those refusing to look ahead.
And I also agree generally with you this will probabilistically be the same financial/economic issue in the future with Social Security and Medicare.
People can say they’ve already ‘paid in’ and ‘earned’ these benefits as much as they want, but financial statistics will win out in the end.
Until AI makes everything free.
https://www.justice.org/resources/research/insurance-industry-is-quietly-making-record-profits
Just the facts for you Mr. Hubris
44K looks insane but look again at the house in the picture. It’s huge, on the order of I bet 5000 sq feet. Rebuilding that would be 1-2 million in materials and that doesn’t include value of contents (you know homes like that have luxury appliances inside etc).
If the house + contents is worth 2 million then 44K a year insurance says 1 disaster every 45 years. Does that seem reasonable?
7000 sq ft, per the article. I checked with an AI and houses in that area with that sq ft tend to run in the $4-5 million range. They appear to be older, empty nesters who likely own the home free and clear..
They also have poor perimeter security because they had a break-in and despite a gun safe, the thieves stole a claimed $250k in heirloom jewelry that was apparently stored in the gun safe.
Yet the wife states that ““We’re not uber rich. We’re not Kardashians,” Lorraine Crawford said, sitting on her secluded back deck surrounded by trees. She said they are afraid that the $44,000 yearly insurance bill is imperiling their retirement plans.”
If a $44k annual insurance cost imperils your retirement plans given the above details, then something isn’t computing here.
Rate rises are not the only way insurers escape insuring lower priced policies. Following my second claim in three years, the adjuster noticed some collateral damage, which I believed to be part of that second claim. The insurance coy billed it as a new claim, and voila’ I triggered the three claims rule and I was denied renewal. All insurers in CT refused to insure, and I was left with Lloyd’s, and had to exclude any water damage from a leaky roof. (I had the roof inspected and was clean of any damage, to no avail.) One broker said companies were declining to include any water damage from roof leaks if roof was more than TEN years old It doesn’t matter if the roofing company offers a 50 year warranty.
Wow, 2 (or 3) home claims in three years? I’m glad you’re not in my insurance pool.
Can you really be surprised a profit-maximizing insurance company doesn’t want to insure you any more?
If your roof is fine per the inspection then why wouldn’t you sign the waiver for exclusion of roof water damage?
Insurance out of control? Hmm….I do recall someone here warning about that years ago. I searched the Mish archives to try and find it but there are so many posts. I do recall wishing you luck with insurance on your new home Mish.
I did find this gem from Donald Trump’s first administration in 2017 about insurance though. Make Insurance Cheap Again: Trump Promises Insurance for All
https://mishtalk.com/economics/make-insurance-cheap-again-trump-promises-insurance-for-all/
That post was on health insurance almost 10 years ago. A decade has gone by and things have only gotten worse. Don’t expect the next decade to get any cheaper at this rate.
People need to start asking themselves today what they will do if they can’t pay for insurance and their home get flooded/fried/tornadoed/hailed/etc.
Got exit strategy?
Elephant in the room? Why can’t Mish say it? Climate Change related disasters. And no, it is not just California. Insurance rates in FL have skyrocketed due to hurricanes and tornados. Homes on the ocean up and down the East Coast cannot obtain insurance. So, has the cost of gas really gone down when we factor in the effects of fossil fuel? Pure Libertarianism would require that the fossil fuel companies pay for the insurance increases.
No doubt inflation in materials and labor are a huge part of this crisis. But ignoring climate change at this point is a fools errand. The article Mish quotes rightly mentions it.
Blood red Florida is already forced to socialize the risk.
The other source of rate rises is related to home price inflation. Those companies that offer market replacement value have had to adjust pool rates to compensate.
People are so quick to defend big money when they are told science is poppycock, just look at your voters.
Oh now you done said it.
Well, the first thing CA needs to do is have WATER in the fire hydrants. RIGHT.
In cases of forest fires like in SoCal, water systems aren’t designed to support many hydrants open and running simultaneously, unless you’re willing to pay for massive reservoirs and oversized transmission mains. They are not designed to have every fire hydrant in a water system is open at once.
It’s cheaper to add the extra capacity than it is to have a fire burn everything down.
Maybe people should be required to fireproof their homes, have a water tank and require new builds to be designed to be fire resistant.
For flood prone areas maybe build on stilts (as one of our investment properties is, 5 feet of water under the house in the 2022 Brisbane floods and no damage, the neighbouring houses built on concrete slabs however….)
Lets not forget that Inflation in services is high, since people who work in those areas have to eat too, and so ultimately insurance, whether its your car or house that has to be repaired, is going to be expensive because last time i checked they can’t fix themselves.
The available measurements of inflation are pretty much all trash since there are highly biased, powerful financial interests involved.
The USA needs a major reset
Well JoJo says robots will fix everything for you in the future so if your house burns down, the robots will come out and magically build you a new one. /s
This is correct. But devils in the details, yes? You may be forced to relocate elsewhere. You may be given a smaller house. But you won’t have to pay insurance, upkeep, mortgage/rent or any other expenses on it.
It’s called …underwriting.
Wow! Newsom & CA. Have found yet another way, to destroy there State! This time, it is to due to… “Unaffordable Insurance” You simply just can’t make this crap up.
At this point Newsom may not be able to be hired to be a dog walker, out of fear he might sell the dog, kick the dog, just lock it in the bathroom, and say he walked it, or placed it leashed on a treadmill… You can’t honestly deny he would try all of these, based on his actions as a human being to date as a CA. politician.
Hey he could put them on his new train, but wait, they don’t have any tracks built yet, or anything really so scratch that!! He could walk the plan laid out with the dog, but I think it may only be 1 mile?, and the dog will need more exercise…
Terrible Dems! A Republican would have done way better. This is very tired American partisan nonsense.
Surely this is just a commercial question? If you live in an earthquake zone and so have to build houses out of wood then you should expect high fire premiums.
The only political thing is whether the state wanted to take on part of the risk.
Intrigued what a Republican administration would have done?
question? If you live in an earthquake zone and so have to build houses out of wood then you should expect high fire premiums.
Answer: Don’t build or allow to be built, houses that will eventually collapse some day. If you do, then no insurance, and when they fall, they get squat!
P.S. Republicans would do the same. “Follow the Money”
Risk = Rates, its pretty simple…
This is why I sold all of my properties in Florida. Insurance was unreasonable and the risk of going without was nerve racking.
I had a friend “Go Naked” after getting hit in Naples and seeing his premiums jump to $50 k’s per year. Got hit again and had to spend $650k to put it back together.
Of course there are all the fossilized wing nuts puttering about at 8 miles per hour and that’s not a great vibe either. They should make the Q-Tip the state animal.
Stu is short for Stupid.
Hahaha. Now Newsom controls the weather? Climate Change related disasters are causing insurance hikes. And no, it is not just California. Insurance rates in FL have skyrocketed due to hurricanes and tornados. Homes on the ocean up and down the East Coast cannot obtain insurance. So, has the cost of gas really gone down when we factor in the effects of fossil fuel? Pure Libertarianism would require that the fossil fuel companies pay for the insurance increases.
Nobody should get insurance, when building in such areas. You can’t expect to get it, or pay as much as you did for the house then…
Uh OH, Somebody took their simpleton pill today…
Some people don’t require pills. They’re just that wya naturally.
He may have donned his patented Stuponitron helmet.
Prepare to Activate!
it’s not much better in parts of Florida.
fact is for whatever reason, fires, floods, hurricanes are more often and more severe and state governance cant’ do squat about it.
people can choose not to live there.
Bingo!
The state could cover a certain % for normal damage from normal storms for those locations. Are there Businesses doing so? Add them into the equation, as they sell a lot, and could add to the state fund for those areas perhaps. Things could be handled differently (Ear Marks rolled over) to allow for changes to assist with things for these types of situations.
Key Words: Normal, locations, and Busineses.
Where do you expect them to live?
The west coast has earth quakes. The southern east coast (Carolinas to Florida) and Gulf coast (Florida to Texas) has Hurricanes.
The population of those states is on the order 120 million people (1/3 of the country). Moving them elsewhere is essentially impossible (the middle of the country may not get earthquakes or hurricanes or wild fires but it does not have the water to support 120 million people).
It has nothing to do with Newsom. You’re hilarious.
Last I knew, Newsom was the Governor. Last I heard, Newsom was still the Governor, Last I checked the Governor of CA. ran the actual State of CA.
It appears, it has had everything to do with Governor Newsom, and for Years now. Unless these are older, um he was then, but what if just recently, um he is still is… see how this works.
The average home in the Pacific Palisades was built before 1979 (CO2 was at 337 ppm), with a significant number dating from the 1920s (CO2 was around 303 ppm). There is no public water system in the United States of America that could keep their hydrants pressurized in that situation. Not yours; not anybody’s in the entire country. The American West is greening due to CO2 fertilization. It’s greener. In the early 1970s the US cattle herd peaked at 132,000,000 head, and it was easy as pie to keep them fed in a less green setting. Now, in the greener American West, the country can’t feed 90,000,000 head. How did the hoax do that? LMAO. Climate Change is physics, chemistry, biology, geology, meteorology, oceanography, mathematics, physics, computer science, etc. If you an A student, you’re probably too stupid to understand it. The damages are going to be monumental. The economists who were spitting out damage numbers like 2% of GDP? Haha.
That was back then, but this is Now! CA. Was forced to recognize Hydroponics and just recently (2025) they started to pay much more attention.
They insist by 2035 I believe, that there will be tomatoes and all sorts of Veggies, being grown indoors, and shipped on that train to nowhere, to deliver them to those homes that have not been built yet, to those people that don’t exist yet, and all thanks to Newsom. Your right, HaHaHa…
Don’t knock Newsom, he has lots of handicaps to overcome as he says he has dyslexia, ADD as well as telling black people that he is as dumb as them with a low SAT and reading comprehension problems.
Damn it, I forgot about that. I could have just worked that in so nicely. Is he handicapped yet, or awaiting closer to the election?
I know. That is all too funny. Imagine a Republican saying they were as dumb as the average black person! The media would be going wild!
So my question is why are they rebuilding in fire prone areas? Also this would apply to flood prone areas
Note I am not on the side of insurance companies but if common sense was used then we would be building in safer areas
So what, you own your home outright and drop your insurance. Then your house gets flooded. Then FEMA will take care of you. That insurance organization is bakrupt too.
David fema should not fund rebuilding in those areas and as you probably know fema money is our money
Yes they are bankrupt also we need our money spent in sensible ways
Can they apply a “Build and Live” at “Your Own Risk and Expense” qualifier? You get some stiff to build it for you, at there expense, then go for it… otherwise you pay, you build, you own, and No Insurance.
To Code of course…
Not sure why anyone would downvote that comment. Well unless they are thinking like me that codes need to be tightened and enforced
They downvote all Stu’s comments.
You aren’t forced to take insurance unless you have a mortgage. So be mortgage free and you can self insure.
Where do you want them to build? The country has 340 million people and it’s adding millions more each year. When I was born there were barely 200 million.
The more people we add, the more we end up building in areas that are going to be destroyed.
Not too many places to build that are safe from Climate Change related disasters.
Seeing as how, in theory, climate change is a hoax. The temperature has changed less than 2 degrees total since 1900. That’s showing me, that the temperature will be up another degree in roughly another hundred years or more, perhaps…
It’s the floods, droughts & screwed up weather patterns that will get you.
“For every degree Celsius that Earth’s atmospheric temperature rises, the amount of water vapor in the atmosphere can increase by about 7%.”
Selected quotes from “Steamy Relationships: How Atmospheric Water Vapor Amplifies Earth’s Greenhouse Effect – NASA Science”
Nice try, but even with a sexy title, I’m sure the MAGA types can easily ignore the science. Facts appear to matter even less that deficits nowadays.
Here is a Fact you can’t explain away. The Federal Gov. is bankrupt.
So we can’t afford to defend against warming and we can’t afford not to. Your science, has to give in to economics. Shall we spend what little we have left defending the whole world against warming or should we protect ourselves, in case the rest of the world doesn’t do their share. If they don’t we end up bankrupt and flooded. Which is where we are heading now
It’s exactly why we just started gathering up Coal!
Thank goodness it’s only risen less than 15C (1+F). Sort of tells us a lot huh. That’s been since “1900” as in a longtime ago…
Small changes in temperature can have large effects on living systems.
The average normal body temperature for an adult is 98.2°F. Most medical professionals consider a temperature above 100.4°F as a sign of a fever. 103 is dangerous. 104 an emergency.
The “small” changes that we have seen in global temperature over the last century are already having a big impact:
AI Overview
Over the last 100 years, global temperatures have increased significantly—with the rate of warming doubling in the last 40 years—resulting in profound, widespread, and accelerating effects on life on Earth. Human-caused climate change, largely driven by fossil fuel emissions, has led to a rapid rise in sea levels, increased ocean acidity, and more frequent, intense, and destructive weather events. NRDC
These temperature increases have affected life through several key mechanisms:
1. Ecosystem and Biodiversity Disruptions
2. Physical Changes to the Environment
3. Impact on Human Life and Society
4. Regional Effects
Even if future warming is limited, many of these effects—such as ocean acidification, rising sea levels, and species extinctions—will continue for centuries.
And those that are left will adapt . The killer virus , revolution from the have nots , bees that have gone extinct ,another ice age , zero birth rates , possibly another huge meteor striking the earth , a reset by our alien benefactors, will see pockets of a brave new world existing to repopulate. I always think of the movie “ Zardos “ .
Exactly!
Stupidity is the answer, yet again.
Once a neighborhood burns down, it should be off-limits to rebuild there!
Climate Change is barely getting started. Just wait until VPD starts really kicking in. Lol.
Anti-science folk can just puff their chests out and tell plants to grow the same with less water and feel superior for now
Water? Like from the toilet?
Brawndo has what plants crave!
Yeah climate change really brought out the arsonist in people who start all those wild fires.
Don’t you think having 340+ million people in the country and building everywhere we possibly can factors into things? Half the places that get destroyed didn’t exist 40 years ago.