Mercury Insurance has triggered outrage across California by filing for a 6.9% average increase on homeowners' policies, citing a controversial new wildfire modelling regulation introduced as part of the state's Sustainable Insurance Strategy.
The move marks the first time an insurer has relied on California's newly approved catastrophe models to justify a premium hike — a step critics warn could pave the way for widespread increases in an already fragile market.
A New Law, A New Loophole?
Mercury's filing uses the Verisk Wildfire Model, which predicts future losses rather than relying only on past claims data. Approved by the California Department of Insurance in July 2025, the framework was designed to stabilise the state's battered property insurance sector.
However, consumer advocates argue that the change opens the door to inflated risk estimates. Richard Wiles, president of the Centre for Climate Integrity, claimed: 'It's not fair that everyday Californians are forced to pay higher insurance rates because of a relentless stream of climate disasters, while the Big Oil companies fueling the crisis rake in profits and pay nothing.'
'Before insurers raise rates, they should stand up for their policyholders and fight to recover damages from the fossil fuel corporations whose climate pollution, obstruction, and disinformation are driving up costs for Californians.'
Who Pays More and Who Pays Less?
Mercury's proposed increase won't be evenly distributed. Homeowners in wildfire-prone areas could see significantly higher premiums, while those in lower-risk zones may experience reductions.
To offset the impact, Mercury says it will expand discounts for policyholders who take proactive steps to reduce wildfire risk. These include clearing vegetation, upgrading vents, and using fire-resistant building materials. Residents in 'fire-prepared' communities may also qualify for additional savings of up to one-third on the wildfire portion of their premium.
The initiative is part of California's Sustainable Insurance Strategy, which encourages insurers to reward mitigation efforts and promote resilience in high-risk areas.
Despite these incentives, many Californians remain sceptical, questioning whether the discounts truly offset the financial strain of rising premiums, especially in high-risk areas.
The FAIR Plan Fallout
California's FAIR Plan, the state-run insurer of last resort, has seen a surge in enrolment as private insurers retreat from high-risk areas. Mercury's filing aims to offer an alternative to the FAIR Plan by expanding coverage in wildfire zones and eliminating the need for supplemental policies to cover gaps, such as water damage and theft.
Mercury CEO Gabriel Tirador defended the move, stating: 'Commissioner Lara's Sustainable Insurance Strategy will help stabilise the California homeowner's insurance market.'
He added that the company's filing represents the first step toward Mercury's goal of expanding insurance options for California homeowners, underscoring its 60-year commitment to California customers and agents across the state.
A Crisis Years in the Making
California's property insurance market has been in turmoil for years, with climate change, rising construction costs, and a series of devastating wildfires exacerbating the issue. Seven of the state's ten most destructive wildfires have occurred in the past decade.
The Los Angeles wildfires in early 2025 destroyed over 16,000 structures and claimed 30 lives. Insured losses are estimated to be between $30 billion and $35 billion. Mercury, along with other major carriers like State Farm and Allstate, paid out more than $1 billion in claims.
In response, State Farm was granted a 17% emergency rate hike and has since requested additional increases. Analysts warn that if Mercury's filing is approved, other insurers may follow suit, triggering a wave of premium hikes across the state.
Meanwhile, consumer groups are urging regulators to scrutinise the use of catastrophe models and ensure transparency in how risk is calculated.
'We are in a statewide insurance crisis, affecting millions of Californians,' said Insurance Commissioner Ricardo Lara. 'Taking this on requires tough decisions. This is not a game.'
As the state braces for another wildfire season, homeowners are left wondering whether their insurance will protect them or price them out.
Californians Caught In The Middle
As another wildfire season looms, homeowners are left asking whether their insurance will protect them — or price them out.
Critics argue that while companies like Mercury lean on new modelling laws, residents are being forced to shoulder the cost of disasters they did not create.
They also argue that the move amounts to profiteering from disaster, as thousands of residents in high-risk areas face skyrocketing premiums amid an ongoing insurance crisis.
