California homeowners facing limited insurance options have received encouraging news as Farmers Insurance announced a significant policy change that could expand coverage access across the state. The insurer has removed the monthly cap on new homeowners insurance policies, opening the door for thousands of residents who previously struggled to secure coverage in a challenging market.

The decision affects three specific policy types: Farmers Smart Plan Home, Smart Plan Condominium and Smart Plan Renters policies. These products were previously restricted to just 9,500 new policies per month, a limitation that left many California residents unable to obtain coverage even when they qualified. By eliminating this cap, Farmers has positioned itself to serve a much larger customer base in a state where insurance availability has become increasingly scarce.

Aligning with state strategy

The move comes as part of Farmers’ alignment with Insurance Commissioner Ricardo Lara’s Sustainable Insurance Strategy, an initiative designed to encourage insurers to maintain and expand their presence in California despite the state’s challenging risk environment. The commissioner’s strategy asks insurance companies to integrate long-term climate and resilience considerations into their underwriting and rating practices rather than simply withdrawing from high-risk markets.

Farmers has responded by filing a new rating plan specifically designed to expand coverage in areas identified as distressed by the California Department of Insurance. These distressed areas typically include communities where residents have faced significant difficulty obtaining homeowners insurance due to wildfire risk, earthquake exposure or other factors that make insurers hesitant to write new policies.

Targeting underserved communities

The insurer anticipates adding several thousand new policies through this initiative, with aggressive marketing planned for roughly 300,000 consumers in distressed areas beginning in early 2026. This targeted approach demonstrates the company’s willingness to serve markets that many competitors have abandoned or severely limited in recent years.

Local agency owners will receive additional resources to increase outreach and improve policy accessibility in these communities. This ground-level support aims to ensure that eligible homeowners understand their options and can navigate the application process effectively, particularly in areas where insurance options have been extremely limited.

Rate changes and discounts

The expansion comes with some financial adjustments for consumers. Farmers has proposed a 6.99 percent average statewide rate increase as part of the new rating plan. While any rate increase presents additional costs for policyholders, the percentage remains relatively modest compared to some recent insurance rate hikes in California and other states facing similar challenges.

To offset some of these costs, Farmers has enhanced its bundling discount for customers who combine home and auto insurance. The discount increases from 15 percent to 22 percent, providing a meaningful incentive for consumers to consolidate their insurance needs with a single carrier. This bundling strategy benefits both the insurer, which gains multiple policies per customer, and consumers, who receive reduced overall premiums.

Company commitment to the market

Behram Dinshaw, president of personal lines at Farmers, emphasized that removing the policy cap reinforces the company’s dedication to California homeowners and maintaining a viable insurance marketplace in the state. Despite the numerous challenges that have pushed some insurers to exit California entirely or dramatically reduce their exposure, Farmers has maintained consistent offerings throughout the turmoil.

This commitment extends beyond the homeowners insurance announcement. In December 2024, Farmers resumed offering coverage across multiple product lines that had been temporarily restricted. These reinstated offerings include condominium insurance, renters insurance, personal umbrella policies and manufactured home landlord coverage. The company also reopened business insurance applications and various Foremost Insurance products, demonstrating a comprehensive approach to serving California customers across different insurance needs.

Market context and challenges

California’s homeowners insurance market has faced mounting pressure from natural catastrophes over the past several years. Wildfires have become more frequent and severe, while earthquake risk remains a constant concern. Climate-driven changes have intensified weather patterns and increased the likelihood of extreme events, making risk assessment more complex and expensive for insurers.

Rising reinsurance costs have compounded these challenges. Reinsurance companies, which provide insurance to insurance companies, have raised their rates significantly in response to California losses, forcing primary insurers to either increase premiums, reduce coverage offerings or exit the market entirely. Many carriers chose to limit their exposure by capping new policies or refusing to write coverage in high-risk areas.

Looking ahead for homeowners

While the policy cap removal represents positive news for California homeowners, consumers seeking coverage will still need to meet standard underwriting criteria. Not every applicant will qualify for coverage, particularly in the highest-risk locations or for properties with significant vulnerability to natural disasters. Farmers encourages potential policyholders to engage with local agency owners to explore eligibility and review available options.

The insurer’s approach could influence other carriers operating in California, potentially creating momentum for broader market stabilization. If Farmers succeeds in expanding coverage while maintaining financial viability, other insurers may feel more confident about increasing their own California exposure.

Source: Insurance Business