State Farm said Friday, May 26, that it will stop accepting new applications for personal and commercial property insurance in California, citing rising construction costs and its “rapidly increasing exposure to disasters.” Seen here, a property burns during the Lightning Complex LNU fire in Pope Valley, Calif., August 20, 2020. (Max Whittaker/The New York Times)
State Farm said Friday, May 26, that it will stop accepting new applications for property and casualty insurance in California, citing rising construction costs and its “rapidly increasing exposure to disasters.”
State Farm said the policy change for personal and commercial lines takes effect Saturday, May 27. The change does not apply to personal auto insurance or existing home insurance policies in the state.
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The company said in a statement that it will work with the California Department of Insurance to restore market capacity in the state.
“We take seriously our responsibility to manage risk,” the company wrote. “However, it is necessary to take these measures now to improve the company’s financial strength.”
State Farm owns the largest share of property and casualty insurance policies in the United States, controlling about 9% of the market and writing at least $70 billion in premiums.
Related: California homeowners may continue to lose insurance as the threat of wildfires approaches
Michael Soler, a spokesman for the California Department of Insurance, said Friday night via email that the policy change by State Farm was among factors “outside our control,” including climate change, reinsurance costs affecting the entire insurance industry, and global inflation. .”
Instead, the DOI is focusing on “protecting consumers” with its Safer from Wildfires rebate program, Soler says.
Created in October 2022 and touted as the first of its kind, the state program requires insurance providers to discount policies for property owners who mitigate wildfire threats by installing fireproof roofing, enclosing eaves and creating fireproof zones. Insurers have 180 days to submit a wildfire risk assessment or conclusion, which the state can appeal.
Property insurance companies in recent years have pulled coverage from tens of thousands of homeowners across the state in the wake of devastating wildfires.
DOI Commissioner Ricardo Lara in September 2022 invoked a law – signed into law in 2018 by the then government. Jerry Brown – Prohibiting insurance providers from canceling or refusing to renew plans for property affected by a wildfire until 12 months after the fire.
Related: The FAIR plan seeks to increase premiums by approximately 50% from the insurance department
Halting insurance rate increases during the pandemic has heightened tensions within the insurance industry.
“The risks are getting worse, and rates have to go up to ensure insurers can be solvent and operate in California,” Serene Taylor, a senior legislative advocate with the California Personal Insurance Federation, told Bay Area News Group in August 2022. .
Lara in 2019 ordered California’s FAIR plan, its insurance plan of last resort, to expand its coverage beyond fire to include liability, theft, and other parts of a homeowner’s policy. The insurance companies, which operate and fund the state-created FAIR plan, have challenged the newer rules in court.
In March of this year, FAIR plan administrators agreed to double the plan’s commercial coverage limits to $20 million for businesses such as homeowners associations that have been unable to find insurance through traditional providers.
The number of California properties facing severe wildfire risk is expected to increase six-fold within 30 years, according to the nonprofit First Street Foundation.
The DOI provides updates about consumer rights and choices on the insurance.ca.gov website. The consumer hotline is 1-800-927-4357.
Staff writer Ethan Varian and CalMatters contributed to this report.
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