Current Events > State Farm halts new property insurance policies in California

(+) Yeah! (+)

The company cited rising construction costs and its rapidly growing catastrophe exposure.

https://gamefaqs.gamespot.com/a/user_image/5/1/6/AAeGNpAAEg8c.jpg
Seen here, a property burns during the LNU Lightning Complex Fire in Pope Valley, Calif., Aug. 20, 2020 (Max Whittaker/The New York Times)

State Farm said Friday, May 26, that it will stop accepting new applications for property and casualty insurance in California, citing rising construction costs and its rapidly growing catastrophe exposure.

The policy change for personal and business lines is effective Saturday, May 27, State Farm said. The change does not apply to personal auto insurance or existing home insurance policies in the state.

In a statement, the company said it would work with the California Department of Insurance to restore its market capacity in the state.

We take seriously our responsibility to manage risk, the company wrote. However, its necessary to take these actions now to improve the companys financial strength.

State Farm holds the largest share of property and casualty insurance policies in the U.S. and controls about 8.3% of Californias market, writing at least $7 billion in premiums, according to 2021 data compiled by the state.

Michael Soller, spokesperson for Californias Department of Insurance, said Friday evening via email that the policy change by State Farm was among factors beyond our control, including climate change, reinsurance costs affecting the entire insurance industry, and global inflation.

Instead, the DOI is focusing on protecting consumers through its Safer from Wildfires discount program, Soller said.

Established in October 2022 and touted as a first of its kind, the state program requires insurance providers to discount policies for property owners who mitigate wildfire threats by installing fire-rated roofs, enclosing eaves and creating ember-resistant zones.

Insurance companies have 180 days to submit a wildfire risk assessment or score, which the state can appeal.

Property insurers in recent years have pulled coverage from tens of thousands of homeowners across the state in the wake of devastating wildfires.

DOI Commissioner Ricardo Lara in September 2022 invoked a law signed in 2018 by then-Gov. Jerry Brown prohibiting insurance providers from canceling or refusing to renew plans for properties affected by wildfires until 12 months after the fire.

A moratorium on insurance price increases during the pandemic only heightened tension within the insurance industry.

Risks are getting worse, and rates are going to have to go up to ensure insurers are solvent and operational in California, Seren Taylor, a senior legislative advocate with the Personal Insurance Federation of California, told the Bay Area News Group in August 2022.

Lara in 2019 ordered Californias FAIR Plan, an insurance plan of last resort, to expand its coverage beyond fire to include liability, theft and other parts of a homeowners policy. Insurance companies, which manage and fund the state-created FAIR Plan, have challenged the newer rules in court.

In March this year, FAIR Plan administrators agreed to double the plans commercial coverage limits to $20 million for businesses such as homeowners associations that were unable to find insurance through traditional providers.

The number of California properties facing severe wildfire risk is expected to grow sixfold in 30 years, according to the nonprofit First Street Foundation.

The DOI offers updates on consumer rights and options at its website insurance.ca.gov. Its consumer hotline is 1-800-927-4357.

https://www.ocregister.com/2023/05/26/state-farm-says-no-new-property-insurance-clients-in-california/

so they wont be here for anyone new like a good neighbor

Like a good neighbour, State Farm is moving out of California.

This is so irresponsible of them and they know it

I feel like things are already falling apart due to climate change and it's not being acknowledged. Major insurance companies in the top 3 most populated states (Texas, Florida, and now California) are refusing to issue policies because of future extreme weather events.

Where is the political response to this? The media acknowledgement of this pattern and how it will only get worse? The recognition that the things we feared have already started to happen?

If we made homes out of concrete and steel, instead of wood... more homes would survive natural disasters.

Just look at Okinawa. Huge typhoons strike the place, but they don't need to rebuild much after every typhoon because their homes are steel-reinforced concrete.

And steel buildings do much better in earthquakes, too.

VampireCoyote posted...

This is so irresponsible of them and they know it

It's irresponsible yes, but that's what private insurance does. If it's no longer financially viable for them to maintain a business, they have to change their business.

Tom_Joad posted...

If we made homes out of concrete and steel, instead of wood... more homes would survive natural disasters.

Just look at Okinawa. Huge typhoons strike the place, but they don't need to rebuild much after every typhoon because their homes are steel-reinforced concrete.

And steel buildings do much better in earthquakes, too.

Yeah but profit margins go down!!

Alucard188 posted...

It's irresponsible yes, but that's what private insurance does. If it's no longer financially viable for them to maintain a business, they have to change their business.

Financially viable in this case is no longer making $10B in profit but only $9B in profit

wackyteen posted...

Financially viable in this case is no longer making $10B in profit but only $9B in profit

Companies dont just throw away profit.

The only reason they would do it that way would be if they actually believed they could transfer enough people out of California and have them make more than 9B in another market.

I dont see that being possible in any way.

Should leave Florida IMO

Insurance company: We only offer policies where we dont think we will ever have to compensate policy holders.

When I lived in Louisiana, insurance wouldnt cover hurricanes. So you pay every month for insurance that wont help you when your house gets destroyed by a hurricane. So thats why we didnt pay extra for that. The loophole they are allowed to use is saying we dont pay for named storms.

We need harsher oversight for these corporations. There should be some months (or even years) where the entire company goes into the red. Health insurance is another thing. That needs to be abolished and healthcare should be free for everyone.

These rules that businesses are allowed to have that prevent them from not seeing profit need to be instantly done away with. For example, a landlord can make you pay $2,500/month, but you get a $400 monthly allotment thats used for home repairs to ensure that they get profit from every property, every month. If you have more repair needs than your allotment, the government says to tough it out for a month because we cant have a landlord operating at a loss on one single property for one month.

Is there even one person on Earth sympathetic to the plight of insurance companies (not counting shareholders, they aren't people).

Alright, what dumbass law did California implement this time, that's causing insurance companies to make up bullshit excuses for leaving?