State Farm won't renew homeowners coverage for 72,000 California homes and apartments

State Farm recently announced its decision to discontinue coverage for 72,000 houses and apartments in California, with the changes set to take effect this summer. This follows their previous announcement, nine months ago, about halting the issuance of new home policies in the state.

As California's largest insurer, headquartered in Illinois, State Farm cited various reasons for this move, including escalating costs, heightened risks of catastrophes such as wildfires, and outdated regulations. The decision to not renew policies for 30,000 houses and 42,000 apartments was made after careful consideration of State Farm General's financial status, which continues to be impacted by factors like inflation, catastrophe exposure, reinsurance costs, and regulatory constraints.

Expressing a commitment to maintaining sufficient claims-paying capacity and complying with financial solvency laws, State Farm emphasized the necessity of these actions at this time.This development coincides with efforts by California's elected insurance commissioner to revamp home insurance regulations over the course of a year. The aim is to stabilize the state's turbulent market by granting insurers greater flexibility in adjusting premiums while securing commitments from them to extend coverage in high fire-risk areas.

The California Department of Insurance stated that State Farm will need to address inquiries from regulators regarding its decision to terminate coverage. Deputy Insurance Commissioner Michael Soller underscored the department's responsibility to ensure insurance companies are held accountable for their actions and commitments to customers in California.

Although it remains uncertain whether the department will initiate an investigation, State Farm's decision comes on the heels of last June's announcement to cease accepting applications for all business and personal lines of property and casualty insurance. This earlier decision was attributed to factors such as inflation, challenges in the reinsurance market, and the rapid expansion of catastrophe exposure.State Farm clarified that the affected policies represent just over 2% of its California portfolio but did not specify their locations or the criteria used for non-renewal.