{"id":1300091,"date":"2023-05-27T17:10:09","date_gmt":"2023-05-27T21:10:09","guid":{"rendered":"https:\/\/bugaluu.com\/news\/state-farm-halts-home-insurance-sales-in-california\/1300091\/"},"modified":"2023-05-27T17:10:09","modified_gmt":"2023-05-27T21:10:09","slug":"state-farm-halts-home-insurance-sales-in-california","status":"publish","type":"post","link":"https:\/\/bugaluu.com\/news\/state-farm-halts-home-insurance-sales-in-california\/1300091\/","title":{"rendered":"State Farm Halts Home Insurance Sales In California"},"content":{"rendered":"
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State Farm Halts Home Insurance Sales In California<\/span><\/p>\n

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Faltering California took another economic hit on Friday, as America’s largest personal lines insurer said it would immediately stop selling new home insurance policies in the state.<\/strong>\u00a0California is the largest<\/a> property and casualty insurance market in the country.\u00a0<\/p>\n

State Farm attributed the decision to three factors: “historic increases in construction costs outpacing inflation, rapidly growing catastrophe exposure, and a challenging reinsurance market.”<\/strong> Reinsurance is a method of transferring some of an insurer’s risk to other insurers.\u00a0\u00a0<\/p>\n

Existing policies will stay in effect — for now. <\/strong>There’s always the possibility that, if things keep deteriorating, State Farm could decide to “non-renew” current policy-holders. That’s what AIG did last year<\/a>, sending thousands of high-end homeowners scrambling to find new coverage.\u00a0\u00a0<\/p>\n

The announcement’s timing — on a Friday afternoon heading into a long holiday weekend — seemed intended to minimize publicity.\u00a0In\u00a0statement<\/a>, State Farm said it “will cease accepting new applications including all business and personal lines property and casualty insurance, effective May 27, 2023.<\/strong> This decision does not impact personal auto insurance.”\u00a0The halt seems to include renters insurance, though the announcement wasn’t explicit on that count.<\/p>\n

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Huge blow for California home owners. State Farm was the only insurer I could find that would insure my home. https:\/\/t.co\/e5FiMB4kSH<\/a><\/p>\n

\u2014 Michael McQuaid (@michaelgmcquaid) May 27, 2023<\/a>\n<\/p><\/blockquote>\n

Inflation has been taking a harsh toll on insurers<\/strong>, who are pressing regulators to approve rate hikes to compensate for rising claim costs. Earlier this month, for example, San Antonio-based USAA posted the first ever annual loss in its 100-year history — a $1.3 billion<\/a> setback.\u00a0\u00a0<\/p>\n

In California, insurers have also been contending with high wildfire risks<\/strong>, and many have curtailed coverage in wildfire-prone regions, or clamped down on homes that lack certain fire-thwarting characteristics, which range from building materials to clearing space between the structure and surrounding trees.\u00a0<\/p>\n

State Farm diplomatically acknowledged the California government’s efforts to make the state a viable place for property insurers to operate in, but implied their efforts to date have been insufficient:\u00a0\u00a0<\/p>\n

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“We take seriously our responsibility to manage risk. We recognize the Governor\u2019s administration, legislators, and the California Department of Insurance (CDI) for their wildfire loss mitigation efforts<\/strong>. We pledge to work constructively with the CDI and policymakers to help build market capacity in California. However, it\u2019s necessary to take these actions now to improve the company\u2019s financial strength<\/strong>.”<\/p>\n<\/blockquote>\n

)<\/figcaption>\n<\/figure>\n

<\/a><\/p>\n

The property insurance situation in the Golden State is spiraling into crisis, and horror stories abound<\/strong>. For example, consider a San Diego County homeowners association<\/a> (HOA) comprising 187 townhouses. The HOA had been been paying $54,000 for property insurance. After the policy was non-renewed, the HOA ended up with a new carrier charging a $293,000 premium — prompting an emergency assessment from each owner.\u00a0<\/p>\n

California already has a notoriously high cost of living, ranking second only to Hawaii<\/a> in the percentage of homeowners (29.7%) who spend more than 30% of their gross income on housing costs. The departure of the country’s largest home insurance provider won’t do anything to help the insurance component of those costs.\u00a0\u00a0<\/strong><\/p>\n

There could be follow-on insurance-market effects from State Farm’s departure, as homeowners who would have been insured by State Farm are now forced to seek quotes from companies who are themselves increasingly reluctant to expand their exposure <\/strong>in the state. In a vicious circle effect, some could wind up following State Farm’s example.\u00a0 \u00a0 \u00a0<\/p>\n

It all promises to put more pressure on California’s FAIR plan<\/strong>, a state-run scheme<\/a> to provide coverage to those who can’t obtain protection from private insurers.\u00a0<\/p>\n<\/div>\n

Tyler Durden<\/a><\/span>
\nSat, 05\/27\/2023 – 20:00<\/span><\/p>\n

From:Zerohedge<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

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