One year after wildfires tore through Pacific Palisades, Altadena, and surrounding communities, the physical signs of destruction remain visible. Empty lots sit beside newly framed homes. Construction crews work steadily along canyon roads. Temporary fencing still hums in the coastal wind.
But as recovery enters its second year, the most consequential challenges are no longer physical. They are embedded in insurance policies, claims files, and regulatory decisions that increasingly determine who can rebuild, how quickly, and at what cost.
The past year has forced a reckoning across California’s homeowners insurance system—one that extends well beyond the burn zones. It exposed deep disparities in claims experiences, highlighted the limits of outdated regulation, and underscored a central truth of climate recovery: fairness in rebuilding depends as much on claims handling and underwriting as on construction itself.
In the months following the fires, homeowner frustration centered less on whether coverage existed and more on how claims were handled. Consumer sentiment varied sharply by carrier, with surveys and regulator feedback showing meaningful differences in responsiveness, transparency, and outcomes. Smoke damage emerged as one of the most contentious issues. While total losses were often resolved more quickly, homeowners with smoke-impacted properties reported delays and disputes—particularly over whether damage that could be cleaned warranted full recovery.
A narrow legal interpretation circulating around the time of the fires suggested that “cleanable” smoke damage might not rise to the level of a compensable loss. That interpretation proved deeply controversial. Regulators took notice, pressing insurers to conduct thorough investigations, rely on independent experts when appropriate, and avoid default assumptions that minimized recovery. The issue was not simply technical; it was about confidence. For families already displaced, the perception of lowballing or delay compounded trauma and eroded trust in the system meant to support recovery.
Even insurers with strong reputations for claims handling struggled with the sheer scale of the disaster. The volume of claims overwhelmed existing infrastructure, forcing carriers to reassign adjusters across regions and, in some cases, transfer files multiple times. Those transfers—while necessary—introduced delays and confusion.
“The fires revealed that claims infrastructure is now as critical as reinsurance capital,” said Greg Econn, Executive Vice Chairman of Venbrook Insurance Services, who has worked closely with carriers, regulators, and rebuilding communities following major wildfire events. “Two policies can look identical on paper, but the way a carrier investigates and pays a claim can completely change a family’s recovery timeline.”
In response, several insurers expanded claims staffing, invested in training, and reexamined surge capacity models. Claims handling, it became clear, is no longer a back-office function; it is a core resilience issue in a climate-driven risk environment.
No institution better illustrates California’s insurance tension than the California FAIR Plan, the state’s insurer of last resort. Designed as a temporary backstop for properties unable to obtain coverage in the voluntary market, the FAIR Plan now insures a significant share of homes in high fire-severity zones—by some estimates, roughly 40 percent in parts of the Palisades.
While essential, the FAIR Plan has drawn criticism for limited coverage, slower claims resolution, and restrictive interpretations of damage, particularly around smoke claims. Regulators acknowledge these concerns while emphasizing the Plan’s constrained mandate and growing exposure. State policy now aims to reduce reliance on the FAIR Plan by restoring voluntary-market participation, but that goal hinges on deeper regulatory reform.
For decades, California maintained some of the most restrictive insurance regulations in the country. Until recently, it was the only state that prohibited insurers from using forward-looking catastrophe models in ratemaking or recovering the cost of reinsurance—even as wildfires grew more frequent and severe. That changed with the state’s Sustainable Insurance Strategy, which allows insurers to incorporate catastrophe modeling and reinsurance costs into rate filings in exchange for commitments to write policies in wildfire-distressed areas and recognize mitigation efforts.
“The old system was increasingly disconnected from reality,” Econn said. “The new framework creates a path toward stability. Rates will be higher, but availability improves—and without availability, recovery simply stalls.”
The reforms mark a philosophical shift from suppressing prices to stabilizing markets. Insurers have begun testing the new framework, and industry leaders express cautious confidence that capital will return, albeit at a cost.
The fires also reignited scrutiny of Coverage A—the dwelling limit that determines how much a homeowner can rebuild. Lawsuits against insurers in recent years have alleged systemic underinsurance, driven in part by replacement-cost tools that underestimated rebuild expenses. Some insurers are now reevaluating minimum coverage standards and vendor models, even if doing so makes their policies less competitive on price. The calculus is shifting: fewer, better-insured policies may ultimately prove more sustainable than broader exposure to underinsured losses.
For homeowners, the lesson is sobering but necessary. Affordability that depends on inadequate coverage can be devastating after a total loss.
If there is a hopeful throughline, it lies in mitigation. Insurers and regulators increasingly agree that wildfire risk is not binary; it can be reduced, measured, and priced. New homes rebuilt under modern Wildland-Urban Interface codes are objectively safer than the structures they replace. Hardened materials, ember-resistant vents, noncombustible clearance zones, and improved roof assemblies significantly extend survivability. In the years immediately following a fire, reduced vegetation can further lower risk.
Some insurers now offer substantial premium discounts for verified mitigation, creating a clearer link between investment and affordability. These incentives alone may not offset all mitigation costs, but they begin to align private behavior with public resilience.
“Wildfire is a solvable problem,” Econn said. “The communities that invest in mitigation—at the home and neighborhood level—are already seeing different outcomes. We just don’t talk about those successes enough.”
Five years from now, California’s homeowners insurance market will likely be smaller, more expensive, and more risk-sensitive. Rates will reflect costs long deferred. But the system may also be healthier if mitigation, modeling, and regulation continue to align. The alternative is grim: expanded reliance on last-resort coverage and shrinking options for homeowners in fire-prone areas.
One year after the fires, recovery is no longer just about rebuilding homes. It is about rebuilding trust—between insurers and policyholders, between regulation and reality, and between communities and the systems meant to protect them. Fairness, it turns out, may be the most critical foundation of all.
By Michelle Edgar, Special to the Daily Press