State Farm Insurance announced that it will no longer offer new homeowners insurance policies in California due to increased wildfire risk and construction costs.
The insurance company blamed his decisionwhich took effect immediately on Saturday, on “historic increases in construction costs outpacing inflation, rapidly growing catastrophe exposure and a difficult reinsurance market.”
The change was necessary, he said, “to improve the financial strength of the business”.
Those who already have home insurance policies will not be affected. The decision has no impact on personal auto insurance.
State Farm is one of the largest insurance companies in the state, writing more home insurance premiums for California residents in 2022 than any other company, according to the Insurance Information Institute.
The company’s decision comes as California continues to see more frequent and intense wildfires.
The state’s most destructive wildfire, Camp Fire in 2018, destroyed nearly 19,000 structures, consumed approximately 153,000 acres and killed 85 people, according to CAL Fire. The largest in the state, the August Complex Fire, occurred in 2020 and consumed 1 million acres of land.
Experts have warned this season’s wildfire activity could also be particularly extreme. Any new plant growth from this winter’s heavy rains will likely dry up next summer, creating more fuel for the fires.
Insurance companies have meanwhile tried to reduce their home insurance policies in the state.
Wildfires in 2017 and 2018 alone wiped out a quarter century of insurance industry profits, The New York Times reported.
Allstate Insurance in 2007 similarly announced that it would stop selling new home insurance policies in California and raise the price for its remaining customers, due to wildfires and fires caused by earthquakes.
In an effort to protect homeowners, the California Insurance Commissioner has imposed a mandatory one year moratorium about insurance companies canceling or refusing to renew some home insurance policies after a state of emergency was declared due to a wildfire. Insurance companies have also been required to offer discounts for homes and businesses taking extra safety precautions against wildfires.