The market for home insurance in California – already in turmoil – has just gotten a bit more complicated. State Farm, the largest provider of property and casualty insurance in California, announced in a press release issued on May 26, that, effective May 27, 2023, State Farm “will cease accepting new applications including all business and personal lines property and casualty insurance.” The press release added that State Farm will continue to issue auto insurance in the state. In the press release, State Farm attributed its decision to

  • historic increases in construction costs outpacing inflation,
  • rapidly growing catastrophe exposure, and
  • a challenging reinsurance market.

In 2022, California became the first state to require that insurers provide a premium discount to home and business owners who implement wildfire protection safeguards at their homes or places of business. This action was taken by California in response to soaring insurance costs
for people in areas prone to wildfires, and to reward home and business owners who took steps to protect their properties.

The immediate response from the California Insurance Commissioner has been limited so far. Michael Soller, deputy commissioner, and spokesman, noted that while State Farm’s priority is its short-term financial goals, the State must prioritize the protection of California insurance consumers. Soller also noted that the factors driving State Farm’s decision to opt out of the California property markets are beyond the control of the Insurance Department, including factors such as climate change, reinsurance costs affecting the entire insurance industry, and global inflation.

So what is a new homeowner or business owner to do in today’s turbulent market?

“Be proactive, be smart, be flexible, and get the help you need,” is the response from Alex Pfeifer, an independent insurance broker with deep experience in the California market. “While it is true that State Farm is the largest single property and casualty insurer in California, it still has only 7.3 percent of the overall market,” said Pfeifer. “So the good news is that there are plenty of other insurers to turn to. However, the market conditions that are cited by State Farm are affecting other insurers as well. Every insurer out there has become more cautious in considering new policies. They are asking for more information, taking longer to consider applications, and – unfortunately – turning away potential customers with greater frequency.” “So, be proactive — start early and get ahead of your insurance coverage issues. Be smart — think hard about what types and amounts of coverage you need and then tailor your search accordingly. Be flexible — the rapidly changing insurance market in California requires flexibility and adaptability. And get the help you need — Five years ago you could scan a few internet ads, submit an application or two by phone or online, and be fairly certain that you would have a couple of policy options within a few days if not sooner. But that is not today’s market. The key to obtaining coverage in this market is finding an experienced broker who will take the time to understand your insurance needs and who has the market contacts and knowledge to obtain coverage.”