Your rate is based on the estimated replacement cost of your home. The dept of insurance recently started allowing catastrophe modeling to rate individual policies so that does allow for some rate diversification across the state. Ultimately, if an insurance company cannot sustain profitability in a state it has to either leave the state or raise rates across all policies in that state. One more thing, your policy is not limited to fire risk. If a pipe in your wall bursts, your repair costs will be similar to a home with the same damage that sits atop a volcano.