Some of this is not quite accurate. The CAFAIR plan is not cheaper than private insurance in California (at least today it’s not). Prop 103 was passed to ensure that insurance companies would profit but never profiteer by providing an essential service for the people of the state. Prop 103 incentivizes insurers to write more policies as the main way of increasing revenue opposed to increasing premiums.
The low cost of homeowners insurance in California was achieved by forcing insurers to effectively manage their risk across a large area and a large population. By regulating insurance at the state level, it allows the people of California to leverage the large size of the state against the corporations.
I think your logic also requires risk to increase year over year which is a false premise. The risk is not guaranteed to increase yoy