SACRAMENTO, Calif. – State Farm, California’s largest insurer, has announced plans to discontinue coverage for 72,000 houses and apartments in the state starting this summer. This decision comes after nine months of announcing that new home policies will not be issued in California.
The Illinois-based insurance giant cited rising costs, the escalating risk of disasters like wildfires, and outdated regulations as the driving factors behind not renewing policies for 30,000 houses and 42,000 apartments. State Farm emphasized that this decision was made after careful analysis of its financial health, impacted by inflation, catastrophe exposure, reinsurance costs, and limitations within long-standing insurance regulations.
Amid a year-long overhaul of home insurance regulations by California’s elected insurance commissioner, State Farm’s move is part of larger efforts to address the challenges in the state’s insurance market. The aim is to provide insurers with more flexibility in adjusting premiums while ensuring commitments to extend coverage in high-risk fire areas.
The California Department of Insurance has indicated that State Farm will need to address inquiries from regulators regarding the discontinuation of coverage. Deputy Insurance Commissioner Michael Soller emphasized the importance of holding insurance companies accountable for their decisions and ensuring they fulfill obligations to policyholders in California.
In June, State Farm had announced the halt of accepting applications for property and casualty insurance, citing inflation, reinsurance market challenges, and increasing catastrophe exposure. The recent cancellations represent just over 2% of the company’s policies in California, with details about the locations and criteria for non-renewal not disclosed by the insurer. The Department of Insurance is yet to confirm if an investigation will be launched into State Farm’s actions.
With State Farm’s decision impacting thousands of residents in California, concerns about access to affordable and comprehensive insurance coverage in areas prone to wildfires have been raised. As the insurance landscape continues to evolve, policymakers, regulators, and insurers will need to collaborate to address the complexities of ensuring financial stability, risk management, and consumer protection in the state’s insurance market.