Insurance giant State Farm is no longer accepting new applications for business or personal property coverage in California.
“We take seriously our responsibility to manage risk,” the company said in a statement posted to its website Friday. “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.”
Automobile insurance is not affected by the change, which took effect Saturday.
The company was the state’s largest provider of property and casualty insurance as of 2021, the most recent year for which data are available from the California Department of Insurance.
“While insurance companies prioritize their short-term financial goals, the long-term goal of the Department of Insurance is protecting consumers,” said Michael Soller, deputy insurance commissioner and spokesman. “The factors driving State Farm’s decision are beyond our control, including climate change, reinsurance costs affecting the entire insurance industry and global inflation.”
Last year, California became the first state to require insurance premium discounts for owners who implement wildfire protection safeguards at homes or businesses. The change was a response to soaring insurance costs for people in areas prone to wildfire.
“Protecting Californians from deadly wildfires means everyone doing their part, including insurance companies, by rewarding consumers for being safer,” Insurance Commissioner Ricardo Lara said at the time.
While State Farm pledged to “work constructively” with California policymakers and regulators, the change is necessary to “improve the company’s financial strength,” the statement said.
State Farm last year posted a net loss of $6.7 billion, driven largely by losses in the auto division. The company’s homeowner division recorded $849 million in underwriting gains.
Source: LA Times