The Home Insurance L.A. – and America – Needs

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This is “The Opinions,” a show that brings you a mix of voices from New York Times Opinion. You’ve heard the news. Here’s what to make of it.
In LA right now, we have one of the most damaging wildfires in the state’s history. At the time I’m recording, there’s been more than 12,000 structures destroyed, at least 24 people dead, and likely a lot more to come, because the winds and the destruction is not over yet.
I’m Nick Mott. I’m a podcast producer and a radio journalist and a print journalist based in Montana. And I’ve also co-written a book called “This Is Wildfire: How to Protect Yourself, Your Home, and Your Community in the Age of Heat.”
Damage is already estimated in the hundreds of billions, and it comes after at least 10 major insurance —
Crews are beginning to make progress, battling the flames, but once the fires are under control, LA will likely address another crisis — insurance.
California, for years, has been facing this insurance crisis, in large part because of their wildfire problem. You know, since 2022, at least 7 of the 12 largest insurers in the country have pulled out, or at least altered the way they offer policies in California, to some extent. Hundreds of thousands of people are not able to get traditional homeowners’ insurance. What’s happening right now is going to put even more stress on an industry that already has no idea how to cope with the reality of climate change.
Homeowners’ insurance was designed to deal with one-off things that happen, like a tree falling on your house or your oven starting a fire or something. Insurance companies can handle that when that happens. But when there’s this community-level disaster, like what’s happening in LA right now, having to pay out billions, tens of billions of dollars — that can bankrupt insurers.
A Senate Budget Committee report from December 2024 warned that the insurance crisis, fueled by climate change, could actually lead to something as bad as the Great Recession of 2008, if not even worse. And yes, we could see insurance companies collapsing or changing drastically. But fundamentally, the issue is actually that people will not be able to afford homes.
So if you can’t get insurance, you can’t get a mortgage, you can’t buy a house. We’ll see homes’ values diminishing. We’ll see, basically, the decline of what a lot of people think of as the American dream. The real issue is a sheer collapse in property values that all funnels from this insurance crisis related to climate change.
We need a national system of catastrophe insurance, something that covers not just one catastrophe, not just flooding, not just wildfire, not just erosion from sea level rise or extreme storms, but everything. In terms of wildfire, the way it could work is this. In addition to standard homeowners’ insurance, people in areas vulnerable to fire would be required to purchase this national system of climate catastrophe insurance.
If catastrophe strikes, then you get the payout. The burden would not just be on insurance companies. It could be a public-private partnership with private insurers, or it could be something more akin to the National Flood Insurance Program that already exists.
Fundamentally, private insurers would keep offering private insurance, but payouts for natural catastrophes, related to climate change especially, would come entirely or in part from the federal government. At the same time, the government can make this mandatory. It could use innovative mapping, even artificial intelligence, to make sure that more development isn’t happening in the worst areas.
It can incentivize retrofitting your homes to make them more fire-resilient. The government could even encourage managed retreat from areas where people already are, meaning it could buy out properties that are going to burn to help people move to safer places. This would be a national insurance policy at a scale we’ve never tried before.
We already have National Flood Insurance policy, and we’ve seen some possible downsides through that program. That program itself already is in tremendous debt to the US Treasury — I think $20 billion in debt. It’s also left a lot of people underinsured.
And people argue that there’s an issue of moral hazard, that if you allow people to get insurance or even encourage people to get insurance in areas that are vulnerable to flooding or fires, they’ll keep on building there. So the argument could be made that flood insurance that already exists or a national system of catastrophe insurance could actually have the opposite effect by people thinking that it’s OK to build anywhere.
But to me, there’s plenty of tools to make sure that doesn’t happen. A number of other countries already have models like this in place. France, Spain, New Zealand — they all have these natural catastrophe systems that worked a lot like this. And so it’s not like the US would be starting totally from scratch.
And in terms of the sort of debt issue, in terms of taxpayer dollars, instead of having just a one-catastrophe system, as we do now with flooding, diversifying the risks from not just flooding, but extreme weather more generally and wildfires, would mean millions and millions of more people are paying into this system, alleviating the debt that the government as a whole is going into, and thereby individual taxpayer dollars. At the same time, the government’s not exactly known for working innovatively and quickly. But there’s real room for public-private partnership here that could do something truly unique that we’ve never seen before.
In California and in other places across the country, individual areas are trying to figure this out. So California, for years, has been trying to figure this out through regulation. They’ve started their own pool of insurance called FAIR that is kind of an insurer of last resort.
If you can’t get insurance anywhere else, you can do the FAIR Plan. And it’s really expensive, and it doesn’t offer as good of coverage as a traditional homeowner’s insurance, but at least you can get something. In particular parts of Colorado, for example, where wildfire problem is also enormous, insurers are also refusing to offer service in some areas.
Nonprofits and local groups have worked with insurers to help them individualize their offerings. So if homeowners do things to make themselves less vulnerable to fire, they can get rewarded. And all of these are tools in the toolbox that we need to incorporate, but we need to look bigger than wildfire, and we need to look bigger than California.
If we look at the large scale, we’re seeing insurers pull out or issue non-renewals in states like Oklahoma. In states like Florida, Louisiana, and North Carolina, flooding and sea-level rise, extreme storms, and wildfire are all pooling to create these massive risks. And we need something bigger that can address this issue.
It’s really easy to think that any natural disaster isn’t going to happen to you. I live less than a mile from a river. I didn’t think we would get flooded where I live. And a couple years ago, the river near my house flooded.
Just like anything, we’re human. We’re shortsighted. We think that this event is not going to happen to us. If anything comes out of the tragedy we’re seeing in California, I hope it’s a demand that something needs to change. And I’m optimistic that despite the tragedy and the scale of destruction in California, that this might be the tragedy that forces us to take collective action and to rethink the course we’re on.