The giant has announced that it is leaving the state’s homeowners’ market due to high risk and construction costs.
State Farm has announced that due to spiking wildfire risks and construction costs, it is leaving selling in California’s home insurance market altogether.
The insurer is stopping new sales of the coverage in the state, which it says has become too expensive.
State Farm issued an official media release to announce its withdrawal from the home insurance market in California. It stopped accepting business and personal applications on May 27. That said, the company will continue to sell auto insurance within the state.
“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,” said the company in its announcement.
According to data from California Governor Gavin Newsom’s office, over the past five years, the state has experienced over 7,000 wildfires per year, with an average wildfire consumption area of more than 2 million acres.
Authorities and scientists are pointing to climate change for the heightened home insurance risks.
California authorities and scientists say that the intensity of the fire seasons has the climate crisis to blame. Though “insurance companies prioritize their short-term financial goals, the long-term goal of the Department of Insurance is protecting consumers,” said Michael Soller, spokesperson for the California Department of Insurance.
Soller went on to point out that the reasons State Farm provided to explain its withdrawal from selling the state aren’t within the control of the agency.
“It’s important to note that current State Farm customers are not affected, and no non-renewals are being issued as a result of this announcement,” explained Soller.
With its affiliates, State Farm is the largest auto and home insurance company in the United States. It said in its statement that it still intended to work with lawmakers and the California Department of Insurance to help build up the state’s market capacity.
“However, it’s necessary to take these actions now to improve the company’s financial strength,” said the insurer, which pointed out that it intended to reevaluate as market conditions evolve.
