Top US Home Insurer Halts New Home/Business Insurance Applications in California.

State Farm Insurance Stops Accepting New Applications for Homeowners Insurance in California

After years of devastating wildfires, State Farm Insurance has announced that it will no longer accept new applications for homeowners insurance in California. The decision was made due to historic increases in construction costs, rapidly growing catastrophe exposure, and a challenging reinsurance market.

According to CNN, California has had an average of more than 7,000 wildfires a year, burning an average of more than 2 million acres over the past five years. Additionally, the median price of a single-family home rose 44 percent, from $626,170 to $900,170 between June 2020 and May 2022, according to CalMatters.

State Farm’s decision does not impact existing customers or new policies in areas such as car insurance. However, it is a significant blow to California, as State Farm is the nation’s largest home insurance company, according to ValuePenguin.

California’s Challenging Business Environment

State Farm’s decision is not unique, as American International Group also left the California home insurance market last year, according to NPR. Tech entrepreneur Peter Rex suspects that there is a deeper reason behind State Farm’s decision, stating that California is a very difficult place to do business.

“And I think that the pretext here, these other reasons, there are real reasons, but I think there’s an unspoken reason here, and that reason is California is a very difficult place to do business,” he said.

— Peter Rex (@PeterRex) May 28, 2023

State Farm’s decision is a major problem for California investors, businesses, and working people, as insurance is a necessary ingredient to any ownership (home, business, or otherwise), according to Rex.

“Regulators/politicians should pivot and do whatever they can to get as many insurance providers competing to sell insurance to business/investors/owners asap & start focusing on economically sound long-term minded policy that benefits working-class people,” he said.

— Peter Rex (@PeterRex) May 28, 2023

Despite concerns, a representative of the California Department of Insurance said there was little it could do about the factors driving State Farm’s decision, including climate change, reinsurance costs affecting the entire insurance industry, and global inflation, according to Fox Business.

State Farm has pledged to work constructively with the California Department of Insurance and policymakers to help build market capacity in California. However, it’s necessary to take these actions now to improve the company’s financial strength. State Farm will continue to evaluate its approach based on changing market conditions.

The Western Journal