"No insurance, no sale": how rising risks are breaking California's housing market

Rising homeowners’ insurance premiums and shrinking availability are transforming the housing and mortgage landscapes, particularly in high-risk areas like California. According to Ben Madick (pictured), CEO and co-founder of Matic, these changes are having cascading effects on affordability and market dynamics.
“The rising costs, and more importantly, the limited availability of products in high-risk areas in San Diego and throughout the state of California, are impacted by the major losses from wildfires, as well as rising costs of materials and goods,” Madick said.
This squeeze on affordability is evident in debt-to-income ratios and stalled transactions in high-dollar homes near wildfire zones, where insurance is often unavailable.
“The volatility in the insurance market has caused certain mortgage transactions to fall through or be significantly delayed due to the lack of product availability. It has stopped certain transactions from being completed because of the lack of availability of insurance,” Madick explained.
Rise and rise of higher deductibles
In response, new entrants and strategies are reshaping the insurance market. Madick highlights the role of non-admitted insurers offering surplus lines products tailored to higher-risk properties.
Higher deductibles, sometimes reaching $10,000, are becoming more common, replacing the traditional $1,000 or $1,500. And this evolution is altering buyer behavior as well. Prospective homeowners, particularly in high-risk areas, are increasingly seeking indicative quotes early in the buying process to gauge affordability.
“The industry does a really good job of highlighting the risks associated with flood zones, but there isn’t the same rigor around other risks,” Madick pointed out.
‘Our network over the last five years has almost tripled’
“Our network over the last five years has almost tripled—from about 20 to almost 60 carriers now,” he added, emphasizing the inclusion of specialty insurers focused on niche markets, such as high-risk properties and investment properties. This diversity allows borrowers to access a broader range of solutions, even in constrained markets.
Technology has been central to these efforts. Matic’s digital marketplace integrates homeowners’ insurance options directly into the mortgage process, enabling borrowers to compare multiple quotes in real time.
Matic is seeing some stabilization in the market this year, even though premiums are still very high. The number of quote options went down last year because of carriers rapidly exiting high-risk regions. We're now starting to see them re-enter, mainly because they’ve been able to gain approvals from state regulators for significant rate increases – not to mention because inflation has also moderated.
Embedded insurance—offered during the home-buying or refinancing process—has become a crucial tool for mitigating risks. By leveraging data from the mortgage ecosystem, Matic increases transparency and provides borrowers with tailored options. For lenders, this system ensures compliance with evolving regulatory requirements.
“When we supply back the policy for the customer, we also supply it to the lender so they can underwrite the loan correctly and close on time,” Madick said.
The broader implications of these changes are significant, especially in a state like California, where climate risks are driving regulatory reform. Madick, a San Diego native, has witnessed the state’s challenges firsthand.
As insurers adapt to these regulatory shifts, companies like Matic are also preparing to evolve.
“We’re continuing to supply new products and services to lenders and servicers so they can do their job as the GSEs make changes,” Madick explained.
Looking to the future, Madick envisions a more resilient and responsive insurance landscape. The convergence of environmental pressures, technological innovation, and regulatory changes is reshaping how the industry operates.
“Our focus is continuing to simplify the role of insurance in all aspects—lenders, servicers, customers, and carriers alike,” he said.