Exclusive: State Farm Stops New Home Insurance Sales in California as Wildfire Risks Grow!

State Farm said it would stop selling new insurance policies to homes in California. This will make things worse for thousands of people in this wildfire-prone state, where coverage is already getting more expensive or harder to find.

State Farm General Insurance Company, which provides homeowners insurance in California for State Farm, said on Friday that it made this choice because “historic increases in construction costs have outpaced inflation, catastrophe exposure is growing rapidly, and the reinsurance market is challenging.”

To improve the company’s financial strength, the insurer said that these steps had to be taken right away.

Homeowners who have lost their home insurance coverage can buy a policy from the California FAIR Plan, a high-risk insurance pool run privately and set up by California law.

As reinsurers raise rates on key business lines by as much as 200% starting on January 1, 2023 will be challenging for global insurers. The war in Ukraine and natural disasters like Hurricane Ian in Florida are to blame for the big losses that reinsurers have had.

Problems have also gotten worse because of climate change. Aon Plc, an insurance broker, said in a study that global insured losses from disasters were expected to reach at least $15 billion just in the first quarter.

State Farm said that it would stop taking new applications in the state as of May 27. This move will not affect personal auto insurance, though.

Late in April, California had its first big fire of the 2023 season, which burned at least 100 acres. This showed that there could be a lot of wildfires this summer and fall.

Experts have warned that the heavy growth of grass and brush caused by the winter rains will dry out in the summer, leaving a bigger, thicker fuel bed for wildfires.

The move by State Farm is bad news for people who own their own homes in the state. Based on the amount of direct premiums written in 2022, the company is the largest provider of homeowners’ insurance in California, according to statistics on the website of the Insurance Information Institute.

Reuters said that some well-known companies, like Liberty Mutual, have stopped offering home insurance in California in recent years.

When asked for a reply, Liberty Mutual did not answer right away.

Data from the state’s Department of Insurance showed that the number of homeowners’ insurance policies that were not renewed by insurers in 2021 in California jumped by nearly 30%, to 241,662. This was compared to the same time last year.

The figures showed that by the end of 2021, about 3% of all home insurance policies in California were FAIR Plan policies. (Noor Zainab Hussain in Bengaluru filed this report.) Megan Davies and Matthew Lewis did the editing)

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