The California home insurance conundrum
As a California homeowner, I’ve watched with dismay as homeowner insurance provider after homeowner insurance provider have fled the state in the face of wildfire risk.
It was quite the shock when I discovered recently (HT: Axios Markets newsletter) that, according to NerdWallet, California actually has some of the cheapest homeowners insurance rates in the country!
Homeowners Insurance Average Cost by State (2024)
| Rank / State | Avg Annual Premium ($300k Dwelling) | vs National Average ($1,759) |
|---|---|---|
| 1. Florida | $5,538 / yr | +215% |
| 2. Louisiana | $4,863 / yr | +176% |
| 3. Oklahoma | $4,570 / yr | +160% |
| 21. California | $1,452 / yr | -17% (Artificially Suppressed) |
| 50. Hawaii | $582 / yr | -67% |
*Note: California's Proposition 103 regulatory regime kept headline premium rates below the national average despite soaring wildfire loss costs, contributing to insurer non-renewals.
It begs the Econ 101 question — is it really that the cost of wildfires are too high? Or that the price insurance companies can charge (something heavily regulated by state insurance commissions) is kept too low / not allowed to vary enough based on actual fire risk?
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