Insurance company documents aren’t exactly renowned for being riveting reading. This week, however, State Farm, the largest insurance firm in the US by premium volume, came out with an eyeball-grabbing update: it has stopped accepting new homeowner insurance applications in California.
In a statement, the company said the decision was based on the heightened risk of natural disasters, such as wildfires, along with historic increases in construction costs.
This news didn’t come out of nowhere. Last year, two large insurance firms in California ended their coverage for some multimillion-dollar houses in wildfire-prone areas. “We cannot charge an adequate price for the risk,” one insurance company CEO explained in an earnings call. But the scope of this announcement seems unprecedented. The US’s biggest insurer halting new policies in the US’s most populous state? A state with a population of nearly 40 million suddenly having its home insurance options curtailed because insurance companies know that extreme weather is only getting worse and more expensive? If this doesn’t serve as a wake-up call about the climate crisis, I don’t know what will. Melting ice caps may be abstract enough to ignore, but plummeting house prices have a way of getting people’s attention.
Clinton Mora is a reporter for Trending Insurance News. He has previously worked for the Forbes. As a contributor to Trending Insurance News, Clinton covers emerging a wide range of property and casualty insurance related stories.