State Farm, the Largest Home Insurer in US Won’t Take New Clients From CA, the Most Populous State

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(AP Photo/Lorin Eleni Gill)

The largest property and casualty insurance company in the United States will no longer accept new customers from the most populated state in the nation. On Friday, State Farm General Insurance Company issued a news release stating that it had made the decision to no longer offer home and business insurance policies to new California customers.

State Farm’s policy took effect on Saturday, denying California customers new insurance coverage for business and personal lines property and casualty insurance. The change will not impact personal auto insurance policies. 

The company pointed to several factors for the change, citing an unprecedented rise in construction costs that have outpaced inflation, escalated risks of catastrophic events such as wildfires, and market changes, writing:

State Farm General Insurance Company made this decision due to historic increases in construction costs outpacing inflation, rapidly growing catastrophe exposure, and a challenging reinsurance market.

We take seriously our responsibility to manage risk. We recognize the Governor’s administration, legislators, and the California Department of Insurance (CDI) for their wildfire loss mitigation efforts. We pledge to work constructively with the CDI 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. We will continue to evaluate our approach based on changing market conditions.

This announcement comes in the aftermath of a series of devastating wildfires that occurred in the state last year. According to a report by CalMatters, California had 7,490 fires in 2022, slightly lower than the five-year average of 7,746.

In response to State Farm’s decision, a spokesperson for the California Department of Insurance said that the department remains committed to protecting customers while blaming climate change as a factor. The spokesperson said:

The factors driving State Farm’s decision are beyond our control, including climate change, reinsurance costs affecting the entire insurance industry, and global inflation.

California grapples with one of the highest housing costs in the nation, exacerbating the ongoing homeless crisis. In an effort to address the shortage of affordable housing, the state plans to allocate approximately $30 million toward the construction of 1,200 small homes.

Earlier this year, State Farm made headlines when it halted new coverage for 14 Kia and Hyundai models in multiple states including Louisiana, Georgia, Oregon, Pennsylvania, and Washington due to the vulnerability of those vehicles to theft. 

Progressive Corporation similarly adopted policies restricting new insurance applications for those models in some areas. A spokesperson for the company said:

During the past year, we’ve seen theft rates for certain Hyundai and Kia vehicles more than triple and in some markets, these vehicles are almost 20 times more likely to be stolen than other vehicles. Given that we price our policies based on the level of risk they represent, this explosive increase in thefts in many cases makes these vehicles extremely challenging for us to insure.

State Farm’s decision to no longer offer home insurance to new customers in California underscores the complexities of inflation, high housing costs, housing shortages, increased prices for construction materials and labor, regulatory burdens, crime, and other California-esque features.

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