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State regs, inflation prompt top insurance company to drop 72,000 home policies – Insurance News

Daily Caller News Foundation

State Farm, California’s largest insurer, will not be renewing 72,000 policies in the state as factors like inflation and regulations make operations unsustainable.

Around 30,000 homeowner, rental dwelling and other property insurance policies will not be renewed starting on July 3, and around 42,000 commercial apartment policies will not be renewed starting on Aug. 20, according to an announcement from State Farm. The company noted it was making these changes to better align itself with current risks that have raised costs in the state, with the announcement only affecting just over 2% of State Farm’s total policies in California.

“This decision was not made lightly and only after careful analysis of State Farm General’s financial health, which continues to be impacted by inflation, catastrophe exposure, reinsurance costs, and the limitations of working within decades-old insurance regulations,” the company said in the announcement. “State Farm General takes seriously our responsibility to maintain adequate claims-paying capacity for our customers and to comply with applicable financial solvency laws. It is necessary to take these actions now.”

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State Farm previously announced in May 2023 that it would not be accepting new applications for homeowners insurance in the state due to increased costs from inflation, growing exposure to catastrophes and a difficult reinsurance market. In response to the announcement, the California Department of Insurance told Axios that climate change was to blame, claiming that it was making wildfires more common.

Many homeowners are choosing to go without home insurance as prices rise and housing unaffordability continues to plague Americans due to high mortgage rates and inflation in the housing market. Allstate has similarly announced that it will not accept new applications in California for homeowners insurance.

California places harsh restrictions on insurance policies, requiring insurers to get rates approved by the state’s Department of Insurance before setting policy rates. The restrictions aim to keep prices low but can make it unprofitable if the rise in rates is not permitted to keep up with inflation.

State Farm did not immediately respond to a request to comment from the Daily Caller News Foundation.

This story originally was published by the Daily Caller News Foundation.

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