State Farm General Insurance Company is no longer accepting applications for property insurance including all business and personal property coverage in California along with casualty insurance, the company announced on Friday.
The company says this decision, effective May 27, comes in response to “historic increases in construction costs outpacing inflation, rapidly growing catastrophe exposure, and a challenging reinsurance market.”
“We take seriously our responsibility to manage risk,” a company spokesperson said. “We recognize the Governor’s administration, legislators, and the California Department of Insurance for their wildfire loss mitigation efforts. We pledge to work constructively with the CDI and policymakers to help build market capacity in California.”
In 2021, California Insurance Commissioner Ricardo Lara announced new insurance protections, in effect for the summer wildlife season, that increase payouts and evacuation benefits for wildfire survivors. Lara said the new protections would mean “larger payouts for some claims and less red tape from insurance companies.”
Last year, Lara enforced the new insurance pricing regulation under the Safer from Wildfires framework that requires insurance companies to provide discounts to consumers who follow safety measures such as upgraded roofs and windows, to prevent wildfire risks.
The new regulation aims to drive down insurance costs and create risk rating transparency for consumers.
“We pledge to work constructively with the CDI and policymakers to help build market capacity in California,” State Farm said in a statement. “However, it’s necessary to take these actions now to improve the company’s financial strength.”
Approximately 71.8 million homes had some level of wildfire risk in 2022, and that number is expected to grow 11% to 79.8 million over the next 30 years due to climate change, according to a report by the First Street Foundation.
“We will continue to evaluate our approach based on changing market conditions,” the company added. “State Farm independent contractor agents licensed and authorized in California will continue to serve existing customers for these products and new customers for products not impacted by this decision.”
This decision does not impact State Farm’s personal auto insurance.