Like a good neighbor, State Farm is there*.
(*Except for new homeowners in California.)
Citing rising construction costs and increasing wildfires in the state, State Farm General Insurance Company announced it is no longer accepting new applications for property insurance in California, The Orange County Register reported.
The move does not affect personal auto insurance or existing home policies, which remain in effect, the outlet reported.
“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 company wrote in a press release. “We take seriously our responsibility to manage risk. … [I]t’s necessary to take these actions now to improve the company’s financial strength.”
State Farm — which is the biggest car and home insurer by premium volume in the country — has just over 8 percent of the property and casualty insurance policies in California, the Register said, citing 2021 data from the state.
It’s the latest move by insurers to pull back from a state that in some parts are rife with wildfires, which makes it more expensive for homeowners to protect their homes, according to the Wall Street Journal. Most of those withdrawals, however, have been limited to places prone to wildfires or to properties without fire-resiliency features, the outlet said.
A California Department of Insurance spokesperson told Fox Business that the reasons behind the company’s decision to pull back from issuing new policies in the state were “beyond our control.”
Early last year, California unveiled standards to keep older homes safe from wildfires, aiming to keep insurance costs affordable after fires last year consumed about 4.2 million acres, damaged or destroyed almost 10,500 structures and killed 30 people.
The rules include a fire-resistant roof, at least five feet of defensible space around the home and a clearly defined evacuation route. While the state already has standards for homes built before 2008, the new standards aim to encourage insurance companies to offer discounts and provide incentives to retrofit older homes.
Twelve insurers, representing 40 percent of the market, offer discounts to owners who take measures to protect homes, compared with 7 percent three years ago.
“Reducing the wildfire risk is critical to making insurance available, reliable and affordable for all Californians,” he said.
— Ted Glanzer