Largest Home Insurer in US Won't Accept New Applications for Home or Business Insurance in California
After years of California wildfires, State Farm Insurance says it has been burned once too often.
On Friday, the company announced in a release on its website that as of Saturday, it would no longer accept new applications for homeowners insurance in California.
“State Farm General Insurance Company made this decision due to historic increases in construction costs outpacing inflation, rapidly growing catastrophe exposure, and a challenging reinsurance market,” the release said.
CNN noted over the past five years, California had had an average of more than 7,000 wildfires a year, burning an average of more than 2 million acres.
Further, according to CalMatters, citing California Association of Realtors data, said that the median price of a single-family home rose 44 percent, from $626,170 to $900,170 between June 2020 and May 2022.
“We take seriously our responsibility to manage risk. We recognize the Governor’s administration, legislators, and the California Department of Insurance (CDI) for their wildfire loss mitigation efforts. We pledge to work constructively with the CDI and policymakers to help build market capacity in California,” State Farm’s release said.
“However, it’s necessary to take these actions now to improve the company’s financial strength. We will continue to evaluate our approach based on changing market conditions,” the release said.
State Farm indicated that the change does not impact existing customers or new policies in areas such as car insurance.
State Farm is the nation’s largest home insurance company according to ValuePenguin, with roughly twice the share of the market taken by second-place Allstate.
A representative of the California Department of Insurance said there was little it could do about the concerns that drove State Farm away, according to Fox Business.
“The factors driving State Farm’s decision are beyond our control, including climate change, reinsurance costs affecting the entire insurance industry, and global inflation,” the representative said.
State Farm was not the first company to decide California was not the place to be.
Last year, American International Group said it was getting out of the California home insurance market, according to NPR.
Tech entrepreneur Peter Rex told Fox News he suspects there was a deeper reason behind State Farm’s decision.
7/12 This is a major, major problem for CA investors, businesses, and most importantly working people. Costs of everything will go up even further, as insurance is a necessary ingredient to any ownership (home, business, or otherwise).
— Peter Rex (@PeterRex) May 28, 2023
12/12 Regulators/politicians should pivot and do whatever they can to get as many insurance providers competing to sell insurance to business/investors/owners asap & start focusing on economically sound long-term minded policy that benefits working-class people.
— Peter Rex (@PeterRex) May 28, 2023
“And I think that the pretext here, these other reasons, there are real reasons, but I think there’s an unspoken reason here, and that reason is California is a very difficult place to do business,” he said.
“And I bet you that State Farm said, you know what, we’re done with this. We’re going to we’re going to go ahead and pull out and we’re going to give reasons that are… generally acceptable and true and legitimate, but we’re not going to state the reason that California just makes it a very difficult place for a business to operate,” he said.
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