Proposition 103 mandates strict limits on how insurers calculate and increase premiums, giving California a unique “rate suppression” problem. When premiums do not reflect actual or predicted risks, insurers cannot break even, forcing them to reduce exposure. Actuarially sound pricing—setting rates that align with real risk—becomes nearly impossible.
The law also made the position of insurance commissioner an elected role, injecting politics into an inherently technical process. Few elected officials are willing to publicly advocate for measures, like increasing premiums in high-risk areas, that might alienate voters.
While Proposition 103 initially succeeded in keeping homeowner premiums affordable, its limitations are now starkly evident in an era of worsening disasters. Many experts see reforming the law as a necessary step for rebalancing the market.
