Insurance screws over thousands of LA homeowners before the Palisades Fire — states could face ‘full-scale financial crisis’

January wildfires in Southern California have created significant property damage and destruction that few could have predicted — except for insurance companies, who pulled policies months before the blaze.

What’s happening?

CBS News, citing data from the California Department of Insurance, reported around 1,600 home insurance policies in the Pacific Palisades — one of the hardest-hit areas — were dropped by insurer State Farm in July.

That’s in addition to the over 2,000 policies halted for other customers in nearby neighborhoods, including Brentwood and Calabasas, in 2024.

Insurers have been ending coverage, upping the price of renewals, or making policies unavailable to new customers up and down the United States because of extreme weather events — which are exacerbated by a warming climate — posing greater risks to the safety and security of homes.

Whether it’s wildfire cover or hurricane protection, homeowners are finding it increasingly difficult to access a financial safety net for their properties should the worst happen — as it did in Southern California.

Why is the insurance crisis concerning?

The insurance crisis has left some spending over the odds for coverage with their existing insurers, avoiding insurance entirely, or going with insurers of last resort, which offer some amount of coverage to people in high-risk areas, often at high costs. 

CBS said 1,400 of the 9,000 homeowners in the Pacific Palisades were on California’s FAIR Plan, the state’s insurer of last resort.

This is causing financial hardship for some residents, or it’s leaving homeowners without financial protection should their homes be damaged or destroyed by extreme weather. These conditions are getting worse because of a warming climate, making wildfires and hurricanes stronger, longer, and more likely.

The lack of insurance coverage is also leading to falling property prices. According to a Senate report, collapsing values across the country have “the potential to trigger a full-scale financial crisis similar to what occurred in 2008.”

CBS said January’s wildfires are expected to be “the costliest” in history, with many high-value properties affected. Property values in the Pacific Palisades average $3.1 million, with the outlet citing real estate information from ATTOM Data.

What can be done about the insurance crisis?

Ultimately, some intervention needs to happen at the government level to protect homeowners and pressure insurance companies into continuing to provide vital coverage without extorting customers. You can write to your local representative to encourage action on this increasingly problematic issue.

Otherwise, we all need to take action to prevent the production of planet-warming pollution that traps heat in the atmosphere and encourages the formation of extreme weather conditions.

Steps we can take include ditching gas-guzzling cars in favor of public transportation, cycling, or walking. People for Bikes cited a European study that found that if 10% of the population swapped one car trip for a bike ride a day, dirty fuel emissions would drop by 10%.

Additionally, according to EarthDay.org, eating one less meat-based burger a week would save the equivalent pollution of taking a car off the road for 320 miles, so look into more plant-based options for your weekly menu.

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