State Farm will discontinue coverage for 72,000 houses and apartments in California starting this summer, the insurance giant said this week,nine months after announcingit would not issue new home policies in the state.
The Illinois-based company, California’s largest insurer, cited soaring costs, the increasing risk of catastrophes like wildfires and outdated regulations as reasons it won’t renew the policies on 30,000 houses and 42,000 apartments, theOrange County Registerreported Thursday.
“This decision was not made lightly and only after careful analysis of State Farm General’s financial health, which continues to be impacted by inflation, catastrophe exposure, reinsurance costs, and the limitations of working within decades-old insurance regulations,” the company said in a statement Wednesday.
“State Farm General takes seriously our responsibility to maintain adequate claims-paying capacity for our customers and to comply with applicable financial solvency laws,” it continued. “It is necessary to take these actions now.”
The move comes as California’s elected insurance commissioner undertakes a yearlong overhaul of home insurance regulations aimed at calming the state’s imploding market by giving insurers more latitude to raise premiums while extracting commitments from them to extend coverage in fire-risk areas, the news group said.
The California Department of Insurance said State Farm will have to answer question from regulators about its decision to discontinue coverage.
“One of our roles as the insurance regulator is to hold insurance companies accountable for their words and deeds,” Deputy Insurance Commissioner Michael Soller said. “We need to be confident in State Farm’s strategy moving forward to live up to its obligations to its California customers.”
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It was unclear whether the department would launch an investigation.
Last June, State Farm said it wouldstop accepting applicationsfor all business and personal lines of property and casualty insurance, citing inflation, a challenging reinsurance market and “rapidly growing catastrophe exposure.”
The company said the newly announced cancellations account for just over 2% of its California policies. It did not say where they are located or what criteria it used to determine that they would not be renewed.
FAQs
State Farm announced it will not renew approximately 30,000 homeowners' policies in California. Homeowners who live in areas at high risk of catastrophes like wildfires will have to buy into the California FAIR plan subsidized by the state. It's expensive and offers only fire coverage.
Is State Farm dropping homeowners insurance in California? ›
State Farm said it is dropping policies across California for financial reasons and is ending coverage in areas with wildfire hazards, among other factors. A company spokesman declined to explain further how it decided which homes to drop.
Why is State Farm canceling policies in California? ›
Last month, State Farm, the Illinois-based company and California's largest insurer, cited soaring costs and the increasing risk of natural disasters — like wildfires and outdated regulations — as reasons it won't renew the policies of thousands of homes.
Is State Farm going to cancel homeowners insurance? ›
This decision comes after State Farm announced in May 2023 that it would no longer be accepting new applications for home and business owners. The cycle of property insurance policy non-renewals will begin on July 3 and the commercial apartment policy non-renewals will begin on Aug.
Why are insurance companies pulling out of California? ›
WHAT'S TO BLAME? State Farm followed suit last year, saying it would stop accepting new home insurance applications in California due to "historic" increases in construction costs and inflation.
Is State Farm not renewing 72000 policies in California? ›
State Farm to non-renew 72,000 policies in California: These zip codes will be impacted the most. State Farm General Insurance Company announced in March that it plans to non-renew about 30,000 property insurance and 42,000 commercial apartment policies in California.
Is Allstate cancelling homeowners insurance in California? ›
Allstate stopped issuing new insurance policies for all business and personal property in California back in 2022. Since then, companies like State Farm, Farmers Insurance and The Hartford have made similar business moves.
Why does State Farm deny so many claims? ›
It's important to know some of the reasons State Farm will deny claims. They might claim that you missed a payment, have lapsed coverage, insufficient evidence, lack of medical records, lack of witnesses, that you had a previous injury, that you really aren't that hurt, etc.
What happens to State Farm agents in California? ›
State Farm independent contractor agents licensed in California will continue to service policies not impacted by these decisions. State Farm General's May 2023 decision regarding new applications remains unchanged. We will evaluate the need for any additional business actions as market conditions change.
Which insurance is leaving California? ›
Tokio Marine and Trans Pacific join State Farm and Allstate in discontinuing coverage for California residents.
It's one of many insurers — big and small — that have either stopped writing new policies or left California entirely citing rising costs and risk in the state.
Why is State Farm leaving California? ›
The insurer blames the rising risk of natural disasters like wildfires in California and the state's outdated regulations.
Why is Allstate leaving California? ›
Allstate cited wildfire risk, the cost of rebuilding homes and the rising price of reinsurance as reasons for halting new policies in 2022.
Is AAA writing homeowners insurance in CA? ›
Insurance products in California are offered through AAA Northern California Insurance Agency, License #0175868, in Montana by AAA Montana, Inc., License #9756, in Nevada by AAA Nevada and in Utah by AAA Utah.
What insurance companies are leaving California? ›
Tokio Marine and Trans Pacific join State Farm and Allstate in discontinuing coverage for California residents.
Who is the largest home insurer in California? ›
California's largest home insurer State Farm raises rates by 20%
How much is the average homeowners insurance in California? ›
How much is homeowners insurance in California? The average cost of homeowners insurance in California is $1,383 per year, or roughly $115 a month, for an insurance policy with $300,000 in dwelling coverage.
