The $23.7 Billion Insurance Gap: How Wildfire Victims Are Left Behind
by Arianna Armelli, Founder & CEO of Dorothy
How many families must watch their homes burn before we change how we respond to disasters? It’s a question I kept asking myself for 24 days earlier this year as I watched smoke-filled skies consume Southern California from my living room TV—a luxury tens of thousands no longer had. Now, those families are navigating the aftermath, not just from the fires, but from an insurance system that too often stands in the way of recovery.
The disaster isn’t over for thousands of property owners impacted by the January 2025 California Wildfires. A slow, complicated, and opaque insurance process has become one of the biggest barriers to rebuilding. Insurance payouts are falling short. Claims are being denied and delayed. And for many, the help they need is nowhere in sight. Our latest Wildfire Impact Report identifies who was hit hardest, exposes critical gaps in the system, and highlights the urgent need for change.
90% of Properties Destroyed—$35.8 Billion in Structural Losses
When the media covers wildfires, the headlines often focus on who lost their homes, honing in on celebrities and luxury properties. But the truth is far less glamorous. Beyond the headlines, our research tells a different story. Most properties destroyed in these fires belonged to working and middle-class families who now face the impossible task of rebuilding with too little insurance coverage and no roadmap for recovery.
At Dorothy, we analyzed over 30,487 properties in the Pacific Palisades and Eaton regions and found 90% of the affected properties were completely destroyed. Of those damaged properties, 92% were single-family homes, indicating over 28,000 homeowners were entirely uprooted due to the fires. Estimated structural losses for single-family homes alone totaled $34.4 billion.
Middle-Class Homeowners Carry the Brunt of the Damage
Our analysis reveals a strong correlation between property size and value, but size alone doesn’t define a home’s worth. Most losses occurred in the $1 million range —well below luxury levels for Los Angeles, where this is considered an average home value. The data shows that mid-range and working-class homes suffered the greatest destruction, while luxury estates were impacted far less.
Beyond the price tag, factors like location, construction type, and population density influence claims evaluations, yet these details are often overlooked, leading to undervalued payouts. For those hoping to rebuild, soaring construction costs add another hurdle. Since late 2024, construction costs have risen 6%, with a 44% increase over the past five years, making recovery even more difficult for underinsured homeowners.
This is critical. If insurers undervalue a claim by ignoring the real cost of rebuilding, homeowners may not receive enough compensation to fully repair or replace their property. Business owners face additional obstacles like rising labor costs and material shortages, which increase out-of-pocket expenses and slow recovery.
The $23.7 Billion Shortfall: What It Means for Property Owners and Recovery
Our findings uncover another major challenge for property owners—the insurance industry is struggling to keep up with disaster recovery, resulting in a slow and complex claims process.
Despite an estimated $35.8 billion in total structural damage caused by the wildfires, insurance payouts to date total just $12.1 billion—almost two months after the fires. With $23.7 billion still unpaid, recovery remains out of reach for thousands. While we can’t determine exactly what portion of the $35.8 billion in structural losses will ultimately be covered by insurance, it's clear that many current policies fail to reflect the true cost of rebuilding. As a result, property owners are now left with navigating a complex insurance process alone and forced to shoulder the cost of repairs themselves.
The unfortunate reality of these delays is part of a larger trend. In just two years, the average time to receive a final claim payment has increased from 31.5 days in 2023 to more than 44 days—a 40% jump and the longest wait time since 2008. At the same time, insurance payouts now cover a smaller percentage of losses than they did 10 years ago.
As severe weather events intensify and premiums continue to rise, the cracks in the system are becoming harder to ignore. Property owners are facing more damage than ever yet are met with an inconsistent and often unfair claims process. With insured losses from natural disasters reaching $218.7 billion in 2024 alone, the system is under immense pressure, exposing deeper structural flaws.
Uncovering the Gaps to Help Property Owners Rebuild
The widening gap in insurance payouts is just one sign of the broader issue. Along with rising claim disputes, outdated policies, and increasing underinsurance, it points to a system struggling to keep up with today’s disasters. Recovery should be faster, fairer, and more effective, but right now, it isn’t.
While financial headlines focus on the billions lost, they rarely show the full impact on the people left waiting. By identifying patterns in damage, claims processing, and recovery efforts, we provide insights that help public adjusters and other disaster recovery professionals step in sooner and advocate for fairer outcomes.
Our analysis goes beyond raw numbers. We highlight the communities most affected, clarify the extent of destruction, and track the progress of recovery efforts. This report is a vital tool for policymakers, insurers, relief organizations, and community leaders working to ensure that homeowners aren’t left behind. With better data and a more complete understanding of the destruction, decision-makers can take meaningful steps to improve their disaster response.
But data alone won’t fix a system that is fundamentally unprepared for the scale of today’s climate disasters. The gap in wildfire recovery funding isn't just a short-term crisis—it’s a symptom of deeper structural issues in how we insure and support disaster survivors. Without systemic changes, more families and businesses will be left stranded in future disasters.
Faster, Fairer, and More Accessible Climate Recovery
If this wildfire season has shown us anything, it’s that our current system isn’t built to handle disasters at this scale— let alone what’s coming. The climate is changing, and relying on outdated policies and slow recovery efforts is no longer an option.
To close the gaps in insurance and recovery, the industry must prioritize better data, faster claims processing, and stronger collaboration across insurers, policymakers, and disaster response teams. Real-time storm impact analysis and improved claim evaluations can reduce delays and ensure that homeowners receive fair compensation faster.
But that’s only part of the solution. Regulators must address outdated policy structures, insurers must rethink risk pricing to better reflect climate realities, and recovery professionals need access to accurate, up-to-date information to better advocate for those affected. Without these changes, more families and businesses will be left without the support they need when disaster strikes.
The system must work when people need it most. The question isn’t whether we can afford to make these changes. It’s whether we can afford not to.
For full access to the report, including raw data of affected properties, or to learn how Dorothy can support your business, contact us at contact@hidorothy.com.
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