California homeowners have steadily seen their insurance premiums rise and rise since 2020. A new Stanford University study points to wildfires as one of the biggest reasons. Average premiums rose 84% between the end of 2020 and March 2026, and deductibles climbed alongside them, from about $1,813 to $2,553. Researchers say the pressure is no longer confined to fire country and is, in fact, now spreading into the larger market in general.
According to the Stanford team’s Climate and Energy Policy Program, around 80% of homes are in lower-risk areas. That’s where coverage has stayed relatively stable. The issue remains that 10% to 20% of homes in high-fire-risk zones, where policies have grown expensive and, in some places, impossible to find.
When private insurers retreat from those zones, homeowners often land on the state’s insurer of last resort, the California FAIR Plan. It is the pricier, more bare-bones option, covering fire and smoke while leaving out much of what a standard policy includes. Stanford found a telling marker of the strain: the FAIR Plan now covers about 5% of the state’s single-family homes, up from 1.5% at the end of 2020, and it backs roughly 6% of new single-family mortgages, about one in 17.
Some relief may be taking hold. The California Department of Insurance, under Commissioner Ricardo Lara, now allows insurers to price policies with forward-looking risk models, a change Stanford says takes time to work its way through the market. Even so, the researchers argue that pricing risk more accurately is only half the task. The harder half, they say, is bringing the danger itself down.
Why Insurers Are Retreating From California’s Fire Zones
After the 2017 and 2018 fire seasons erased years of industry profit, major carriers started to pull back, and by 2022, seven of California’s 12 largest home insurers had reduced or halted new underwriting.
Every insurer in the state has to be able to fund the FAIR Plan if it runs short, and after the January 2025 Palisades and Eaton fires in Los Angeles, regulators approved a $1 billion assessment on those insurers, with half allowed to pass to ordinary policyholders, according to United Policyholders. Setting aside money for that kind of bill gives companies a reason to limit how many policies they write statewide, whether the fire risk is lower or not.
A policy report from the free-market Independent Institute, written by Kristian Fors, shares that diagnosis and goes further, arguing the market effectively collapsed under Proposition 103 and calling for its repeal so insurers can price risk freely. That prescription is contested, since the law’s defenders credit it with holding rates down for decades.
What the Researchers Say Would Bring Costs Down
Stanford’s larger point is that no amount of careful pricing solves a wildfire crisis on its own. If the fires keep worsening, the insurance keeps getting more expensive. There’s one tool to fight the good fight that stands out: prescribed burning, the controlled fires that clear the brush and dead fuel that feed large blazes. Marshall Burke found the payoff was sizable.
Burning an area on purpose sharply cut the odds of an extreme wildfire there for about a decade, and it reduced the toxic smoke a runaway fire would have thrown off, which Burke’s research links to real harm to human health.
California wants to prescribe-burn about 500,000 acres a year. Work is also being done to harden homes, making fire-resistant roofs and ember-resistant vents. All of this work can help to earn discounts and improve the odds of getting back into the regular market. Neither fix is cheap, however, and Stanford is blunt about the best solution: burning down fewer homes.