Homeowners insurance policies, which lenders generally require to get a mortgage, cover the costs of losses and damage to your property in the event of disasters and other unexpected events.
State Farm, a major insurance company, says it is no longer writing new homeowners insurance policies in California. John asked VERIFY if the decision impacts all State Farm customers in the state, including those with existing homeowners insurance policies.
THE QUESTION
Will current State Farm homeowners insurance customers in California lose their coverage?
THE SOURCES
- State Farm
- California Department of Insurance
- Rex Frazier, president of the Personal Insurance Federation of California (PIFC), an association representing leading insurance companies
- The Insurance Information Institute (III)
THE ANSWER
No, current State Farm homeowners insurance customers in California will not lose their coverage.
WHAT WE FOUND
State Farm announced that as of May 27, the company will no longer accept new insurance policy applications for both personal and business properties in California, citing “increases in construction costs outpacing inflation, rapidly growing catastrophe exposure and a challenging reinsurance market.” The company said it is still writing new private auto insurance policies.
The decision only applies to new homeowners insurance policies in the state. “Current customers will not lose their insurance” and people are still able to renew their existing policies, the California Department of Insurance clarified on May 30.
State Farm is the only homeowners' insurer in California that has not rejected any policy renewals due to wildfire risk since the fires of 2017, Rex Frazier, president of the Personal Insurance Federation of California (PDIC), told VERIFY.
The Department of Insurance said factors beyond the state’s control, including “climate change challenges, higher reinsurance costs affecting the entire insurance industry and global inflation,” are driving State Farm’s decision.
State Farm is not the only insurance company that has stopped writing new property insurance policies in California.
A spokesperson for Allstate told VERIFY partner station ABC10 that it “paused new homeowners, condo and commercial insurance policies in California last year” so the company “can continue to protect current customers.” The insurance company did not clarify the reasons behind its decision.
American International Group (AIG) also announced in January 2022 that it was exiting the homeowners' insurance market in California.
“The number of acres burned in California has grown steadily in recent years, as more people are moving into fire-prone areas of the state,” the Insurance Information Institute (III) said in a statement. “More homes in harm’s way – combined with rising costs of repairing or replacing houses either damaged or lost to fire – leads to increased insured losses. On top of all of this are the underwriting challenges associated with public policy in the state.”
Other U.S. states, including Florida and Louisiana, are also navigating their own homeowners' insurance issues due to hurricane activity and fraud concerns, according to III.
In Florida, some insurers have become insolvent and others have decided that they will no longer write homeowners insurance coverage in the state, the Institute says. This comes as the state has been “the home of too much litigation and too many fraudulent roof-replacement schemes,” CEO Sean Kevelighan said.
Louisiana’s property insurance market has been deteriorating following record levels of hurricane activity during the 2020 and 2021 seasons. Dozens of insurers have voluntarily withdrawn from the market in the state and more than 50 have stopped writing new policies in hurricane-prone parishes, according to III. In addition, twelve insurers that write homeowners policies in the state were declared insolvent between July 2021 and February 2023.
While State Farm is limiting its operations in California, approximately 115 companies continue to write residential policies in the state, depending on the home’s features, its wildfire risk score and the community in which it resides, according to the Department of Insurance.
The state’s online Insurance Finder tool can help residents locate an agent in their area. Experts with the state Department of Insurance can also answer California insurance coverage or claim questions by phone at 800-927-4357 or via online chat.
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