State Farm General Insurance Company plans to non-renew about 30,000 property insurance and 42,000 commercial apartment policies in California, the company announced Wednesday.
State Farm, California’s largest insurer as of 2022, said the move would impact 2% of its total policies in the state and was made to ensure “long-term sustainability.”
The 42,000 commercial apartment non-renewals represent a complete withdrawal from the commercial apartment market in California. The other 30,000 non-renewals would impact homeowners, rental dwellings, and other property insurance policies, according to State Farm.
The announcement applies to California customers only. The company said those impacted will be notified between July 3 and Aug. 20.
“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 company said in a statement.
The company also said it will continue working with the Department of Insurance, Gov. Gavin Newsom and other policymakers as they pursue reforms “to establish an environment in which insurance rates are better aligned with risk.”
In February, the state’s insurance department announced proposals to reform California’s insurance regulations. The new proposal would allow insurance companies to switch from using historical data to catastrophe modeling, meaning companies would calculate projections of future risk when raising rates and pass on the cost of reinsurance to consumers.
The new changes are expected to take effect at the end of the year.
Last year, State Farm announced it would stop accepting new insurance applications for all business and personal property in California.
Since then, other companies like Allstate have announced similar moves.