California’s Property Insurance Crisis Is a Racial Equity Crisis. Here’s What We Can Do About It.
Homeowners insurance in California is becoming more expensive, harder to secure, and less reliable. But these growing costs and risks are not borne equally.
Low-income communities and communities of color are already more likely to live in neighborhoods exposed to greater climate risks, with less financial resources to recover after a disaster. This is the legacy of decades of redlining and disinvestment. As California’s insurance market becomes more unstable, these existing inequities are deepening.
In this blog, we unpack how California’s insurance crisis is developing, the implications for racial equity in the state, and what The Greenlining Institute and our partners are proposing to do about it.
California’s Insurance Crisis, Explained
What is happening?
California’s home insurance crisis is escalating in several ways: rising premiums and deductibles, more nonrenewals, insurers pulling back coverage from certain areas, and an increasing reliance on the California FAIR Plan. As a result, insurance is becoming more expensive while policies cover less.
Between the end of 2020 and March 2026, premiums for single-family homes in California rose 84%, while average deductibles climbed from $1,813 to $2,553. Nonrenewal rates also rose 82% from 2018 to 2023, while several insurers have outright stopped issuing new home insurance policies.
When homeowners can’t secure coverage, many turn to the California FAIR Plan, a state-mandated insurer of last resort funded by private insurers operating in the state. The FAIR Plan is limited in scope, generally covering damage from fire, smoke, lightning, and in-home explosions. Nearly 40% of FAIR Plan users seek supplemental insurance to fill coverage gaps. Nevertheless, reliance on the plan has grown dramatically, from 140,000 policies in 2018 to over 696,562 as of March 2026.
This uptick is concerning – not only because it means Californians have fewer options and less coverage for insurance – but because its costs are ultimately shared across the private insurance market. After catastrophic losses, the FAIR Plan can levy assessments on its member insurers, which can then pass those costs on to their policyholders, who essentially subsidize those on the FAIR Plan.
This raises an important question: who ultimately bears the cost of an increasingly unstable insurance market – and are those costs being distributed equitably?
Why is insurance getting so expensive?
Inflation and the rising costs of rebuilding homes are part of the answer. Supply chain shocks during the COVID-19 pandemic drove up construction costs, and replacement costs for property and casualty-related losses increased by 45 percent between 2020 and 2023.
Climate change is also increasing the frequency and severity of extreme weather events and disasters. Between 2000 to 2024, California saw 35 disaster events with over $1 billion in losses, compared to just 11 from 1980 to 1999.
Insurers operate by spreading their risk exposure among a wide pool of policyholders, but as climate-related losses become more frequent and costly, it becomes more difficult to diversify risk exposure. This drives insurers to increase premiums, reduce coverage, and ultimately pull out of certain areas altogether. As the ratio of losses to premium revenue grows, insurers stop renewing policies in the highest risk areas, on top of raising premiums for everyone else.
At the same time, homeowners across the country are moving into riskier areas. In California, residents are increasingly moving into areas with greater wildfire exposure in search of more affordable housing.
Insurance companies are also using new artificial intelligence and surveillance technologies – like drones and satellite imaging – to assess risk and make pricing and renewal decisions, sometimes without property owners’ consent. Instead of underwriting policies based on actual damage and loss, insurers are using these technologies to enable predictive models to price-in potential future risk. As these emerging tools and practices become more widespread, transparency and oversight are increasingly important to avoid inflated or potentially discriminatory outcomes.
Communities of Color Face the Highest Risks – and Costs
The insurance crisis affects all of us – but not everyone is on equal footing.
Low-income communities and communities of color are already impacted by a century of redlining practices by governments, lenders, and insurance companies. Nationally, 11% of Black homeowners, 14% of Latino homeowners, and 22% of Native American homeowners are completely uninsured – a stark contrast to 6% of white homeowners. Recent research from California found that low-income, Black, and Latino residents are among the most likely subgroups to be uninsured.
The Consumer Federation of America also recently found evidence of a “racial premium gap,” with homeowners in Black and Latino neighborhoods paying more for home insurance than residents of white neighborhoods, even after accounting for other factors. Homeowners in Latino communities were found to pay a 30% higher premium (or $950 more per year), while homeowners in Black communities pay a 16% higher premium ($500 more per year).
While California insurers are prohibited from using credit scores to set home insurance premium rates, using ZIP codes and other metrics shaped by historical redlining can still potentially produce racially discriminatory outcomes.
Communities of color are additionally more likely to be exposed to climate risks overall. Nationally, census tracts with a majority of Black, Latino, or Indigenous, residents have 50% greater vulnerability to wildfire compared to others. These are the very same communities where insurers may be charging higher rates or no longer offering coverage based on perceived environmental risk – otherwise known as “bluelining.”
The insurance crisis also affects renters. Costs have gone up more than 75% percent for the average multifamily housing unit from 2019 to 2024, which translates to higher rents and constraints on affordable housing production. Households of color are disproportionately more likely to be renters.
Taken together, these disparities create a compounding cycle in which the communities most exposed to climate risk are also more likely to face unaffordable or declining insurance coverage, ultimately being left with fewer resources to prepare for, withstand, and recover from climate disasters.
Disaster Deepens Inequities
These inequities are often deepened when disaster does strike. Black homeowners nationally are less likely to be approved for disaster aid and receive smaller sums from private insurers and FEMA even when they do. Black homeowners are also roughly 3% more likely to have claims rejected, and if approved, still receive payouts about 5% lower than white policyholders filing similar claims in the same neighborhoods.
These inequitable trends in insurance payouts have profound effects on Black households, as nearly half of all Black wealth is tied to home equity, underscoring the importance of maintaining the value of these assets. This is all the more critical, given that the value of Black-owned homes have declined more than that of any other racial group since 2023, disproportionately stripping Black wealth.
We are seeing these trends play out. In Altadena following the 2025 Eaton wildfire, nearly 60% of Black-owned homes sustained severe damage. Of those homes, 73% showed no sign of meaningful steps towards rebuilding as of late 2025. This could be attributed to the difficult process of insurance settlements or limited or no coverage to begin with. Black and Latino homeowners were more than twice as likely as white households to lack insurance in Altadena.
Where Do We Go From Here? A Blueprint for a More Equitable Insurance System
California has started taking steps to stabilize its insurance market. But the state must do more to protect consumers, address climate risks head on, and ensure the benefits of reform reach communities that have historically been sidelined.
That is why The Greenlining Institute joined advocates and experts working across insurance, consumer protection, climate, financial risk, and community investment to develop A Blueprint to A.C.T. for California’s Next Insurance Commissioner.
The Blueprint is designed to help inform the priorities of California’s incoming Insurance Commissioner. It lays out recommendations for building a more stable and equitable insurance market around three areas: Affordability, Climate Risk Reduction, and Transparency.
Below are a few key recommendations included in the Blueprint. A full list can be found here.
Protect consumers and keep coverage within reach.
The Blueprint calls for greater oversight of how insurance rates are set, including more transparency into the data and assumptions insurers use to justify cost increases.
It also recommends stronger protections when insurers stop renewing policies or withdraw from communities. That could include stronger advance-notice requirements and clearer standards governing market exits so households have more time to find alternative coverage.
The incoming Insurance Commissioner must also work to reform the FAIR plan to strengthen its solvency, protect policyholders, and ensure financial burdens are not disproportionately placed on policyholders or the broader public.
Importantly, investments in climate risk reduction should lead to meaningful improvements in insurance costs and access to coverage. When climate risks such as wildfire are mitigated at the property, community, or landscape-scales, this should be clearly reflected in models used for underwriting and rate pricing.
The Blueprint also calls for greater investment in climate adaptation, including from insurers, with particular attention to low-income households and communities that have historically had less access to these resources.
Advance transparency and accountability.
The Blueprint calls for greater transparency and standards around catastrophe modeling and underwriting, expanded public modeling, and more detailed reporting from insurers – for instance, on coverage and market activity, trends related to pricing, non-renewals, and claims outcomes. The Blueprint also proposes clearer triggers for regulatory review when there are patterns of potentially unjustified pricing, discriminatory impacts, or other unusual patterns. The goal is to give regulators and the public better information about where problems are emerging and to address these proactively. This also helps to ensure that companies with repeated violations are subjected to greater oversight and accountability.
Institutionalize Climate Risk.
The Blueprint calls for climate to be incorporated into the California Department of Insurance’s financial supervision. This would allow CDI to have oversight over evaluations of insurers’ exposure to climate risks and how these interact with both underwriting and investment portfolios. That includes evaluating insurers’ exposure to climate-related losses and requiring greater public reporting on how those risks could affect their financial stability.
CDI should also mandate insurers develop transition plans to ensure investment and underwriting strategies do not undermine long-term solvency nor contribute to increasing climate risks.
Building a Better Insurance System
California’s insurance crisis threatens household financial security, housing affordability, and climate resilience. Those consequences will hit low-income communities and communities of color hardest – deepening longstanding racial and economic inequities – unless the state takes action.
California has an opportunity to build an insurance market that is sustainable while ensuring consumers are protected. The Blueprint to A.C.T. offers a path forward by rooting affordability, climate risk reduction, and transparency at the center of these discussions.
