California’s Largest Home Insurance Company to Discontinue Coverage for 72,000 Policies
In a move that has left many Californians scrambling for alternatives, State Farm, the state’s largest home insurance provider, has announced that it will be discontinuing coverage for 72,000 homes and apartment policies starting this summer. The decision comes as a result of a combination of factors, including inflation, regulatory costs, and increasing risks from catastrophes.
State Farm General cited financial health as a major factor in the decision, noting that the company has been impacted by inflation, catastrophe exposure, reinsurance costs, and decades-old insurance regulations. About 30,000 home policies and 42,000 commercial apartment policies will be affected, making up just over 2% of State Farm’s general policy count in California.
This move by State Farm follows its decision to stop accepting new home insurance applications in California last year due to historic increases in construction costs and inflation, as well as a 20% rate hike for existing customers. AllState also paused sales of new home insurance policies in the state in 2022 due to wildfires and higher costs of doing business.
The trend of insurance companies scaling back in California appears to be growing, with seven of the 12 largest insurance groups in the state either pausing or restricting new homeowner policies in the past year. Many Californians are now turning to state-run insurance programs like the “FAIR Plan,” the state’s insurer of last resort, as private insurance companies are increasingly unwilling to issue new policies to homeowners facing high premiums in risky areas.
The impact of smaller companies pulling out of the state due to increased costs has also been felt, leaving thousands of Californians without adequate insurance coverage. As homeowners face uncertainty and rising costs, the future of the state’s insurance market remains unclear.
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