The State Farm General Insurance Company, the largest provider of homeowners insurance in California, announced that it will not renew about 72,000 policies over fire risk.
In a press release published on its website on March 20, State Farm said it does not plan to renew approximately 30,000 property insurance policies and 42,000 commercial apartment policies.
"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. 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 is necessary to take these actions now," the press release read.
The non-renewal will only be done in California and will occur on a rolling basis starting July 3, 2024, for homeowners, rental dwellings, residential community associations, and business owners policies. Non-renewal for commercial apartment policies will begin on August 20, 2024. Customers who will be affected by the non-renewal will receive notifications, according to State Farm.
The Insurance Situation in California
State Farm's recent move comes after the company announced last year that it is ceasing to write new homeowners' policies in the state. Reasons cited for that decision were wildfires, rising construction costs, and challenges with reinsurance.
Additionally, State Farm raised rates by an average of 20% this year for policies that are being renewed. The new rates took effect on March 15, per the San Francisco Chronicle.
Apart from State Farm, other insurance companies in California also pulled back coverage, citing the state's proneness to devastating flooding and wildfire.
The Hartford, which covers less than 1% of homeowners in California, announced in late January that it will no longer offer new home insurance policies to the state's residents. That took effect in February.
Allstate, the fourth largest property and casual insurance provider in the state, also stopped selling new homes, condominiums, or commercial insurance policies. The company noted that it had become too expensive to underwrite policies in California.
Other insurance companies that pulled back coverage in California include the American International Group, Chubb, and Farmer's Insurance.
