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Insurer’s Response to the LA Wildfires

January 27, 2025

The Los Angeles area wildfires have killed at least 27 people and destroyed or damaged more than 17,000 buildings as of January 20, 2025. Damages from this catastrophe are estimated to be at about $50 billion, while CoreLogic announced a preliminary range of insured losses for the Eaton and Palisades Fires of $35 billion to $45 billion, which would make it the costliest wildfire event in history. This catastrophe has created a wave of frenzy that could have years-long implications. From outcries against insurance carriers like State Farm, Farmers, and Allstate who have fled the state in recent years, to disappointment in political leaders’ lack of preparation and policy that could have prevented or mitigated this event. 

At its core, this reflects a deepening issue – a disconnect between insurers, regulators, and consumers on how to address the escalating risks posed by changing weather patterns.

Consumer Sentiment

Consumer reactions have ranged from calls to boycott insurers who recently non-renewed policies in affected areas to ousting political figures unprepared for this inevitable catastrophe. Concerns about California’s Fair Access to Insurance Requirements (FAIR) plan’s ability to pay claims have also arisen, leading many to believe impacted homeowners will have a hard time recovering from this event and could face financial devastation. Many are calling for stricter regulations and requirements for insurance companies to provide coverage in high-risk areas like California. Others argue that the focus should be on implementing better forest management practices and investing in preventative measures.

The aftermath of these disasters has also highlighted the issue of affordable housing in the state, which could be exacerbated going forward. An LA Times article discussed some of the likely impacts, including what could be a balloon in rental rates in the area. 

Politicians in the state have not avoided consumer scrutiny. California’s strict insurance regulation may have contributed to insurers leaving the state or shedding policy coverages. Insurer’s inability to raise premiums commensurate with the risks that exist in California has led to an exodus of carriers over the last couple of years. The domino effect is that it leaves many customers with fewer options for coverage, and/or scaled-down coverage that does not adequately protect against catastrophic loss.

The Insurance Dilemma

The underlying factors of climate change and its impact on weather patterns, coupled with inflation and other economic constraints, have also left insurers in a precarious position. Failing to take non-renewal actions many of them did 6 months to a year ago would have put them and many of their policyholders at additional financial risks, including the inability to remain solvent in the state. 

However, the consumer backlash from insurers leaving the state has become more pronounced considering the recent event, which could harm the brand identities of many large carriers. We discussed this extensively in our 2025 Comperemedia Insurance Trends; Shrinkflation in Insurance and Winning Back Trust. Ultimately, what I see happening in the aftermath of the LA wildfires will be a tsunami of cries for upheaval of insurance practices from customers, politicians, and insurers themselves. Whether or not changes take place will largely depend on state regulators’ response to this event.

How Will Insurers Respond?

In the US, 55% of homes built in the current decade face wildfire risk, a significant increase compared to 14% of homes built from 1900 to 1959. This doesn’t include other risks, such as floods and hurricanes, which carry even greater loss potential. Insurers will need to navigate this phenomenon for the foreseeable future. Brands should focus on reframing how consumers perceive them—shifting from being seen as obstacles to being recognized as solutions and partners in addressing the challenges of weather-related disasters. Many are already on that track. 

In what was at least in part a show of support for the wildfire victims in Los Angeles, State Farm announced it was pulling its Super Bowl ad set to premiere this February. Travelers Insurance has partnered with American Forest for years to support reforestation efforts, which helps regulate carbon levels among other environmental benefits. Several brands in Canada have launched campaigns to both educate and incentivize customers on ways to mitigate damages during a catastrophe, including Allstate and Intact.

Education remains a critical component in the insurer/consumer disconnect, as the complexities of insurance often lead to customer misunderstandings about what can and can’t be covered at any given time and place. Brands must work double-duty to provide clarity and assurance of their products and coverages, before, during, and even after a customer has been insured. Technology will be a key tool in helping them do that, while also providing new opportunities to mitigate, avoid, and properly price property risk.

What we think

Today’s customers are more keenly aware of the frequent catastrophic events than ever. According to Mintel’s Global Outlook on Sustainability, 58% of consumers across several markets, including the US, China, and European countries, reported that experiencing extreme weather events in their country encouraged them to do more to protect the environment.

This figure has increased by four percentage points since 2021, indicating a growing responsiveness to climate-related issues. In the insurance space, this could play out in some consumers simply choosing to avoid areas where catastrophes are most prone while taking the initiative in mitigating their properties against loss. Ultimately, it will take insurers, regulators, and customers working together to navigate the current risk environment.

Kendall Gadie
Kendall Gadie

Kendall Gadie manages Comperemedia’s Insurance content, thought leadership and insights. He provides omnichannel marketing analysis and competitive insights for some of the largest brands across P&C, Life and Health in the U.S. and Canada. Kendall joined Comperemedia in 2021 and has more than twelve years of insurance experience, with roles in underwriting, competitive intelligence, and strategy.

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