As of Saturday, State Farm is longer accepting new applications for homeowner’s insurance in California, attributing that to the growing risk of climate catastrophes like wildfires and also to spiking construction costs.
In the last half-decade, Californians have weathered whiplash from the worst wildfire season on record during a megadrought to catastrophic flooding after the rainstorms this winter.
“With the five years of intense wildfires and losses that we’ve had, we pretty much lost all our underwriting profit that we had from the last 20 years,” said Janet Ruiz of the Insurance Information Institute.
Ruiz argued part of the issue is California’s Proposition 103, which forces insurance companies to require prior approval from the state’s insurance department before implementing rates. Some analysts say this has kept rates in California artificially low.
While the law keeps rates down, the insurance industry argues it also put homeowners at risk of fleeing providers.
While State Farm is no longer accepting new home insurance applications, William E. Chea, president of the Santa Clara County Association of Realtors, wants to remind homebuyers that there are still other options.
“Obviously, it’s not a great thing they decided to do this,” said Chea. “But we are counseling new buyers and letting them know that there are companies still willing to insure them.”
State Farm said it will still honor already existing home insurance policies for Californians.
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.