State Farm Halts Home Insurance in California - WSJ

[marindependent]

According to the Wall Street Journal: "State Farm is stopping the sale of new home insurance policies in California effective Saturday, because of wildfire risk and rapid inflation in construction costs."

Source [EXTERNAL LINK] - State Farm Halts Home-Insurance Sales in California

 

[marindependent]

And.... from their Own news bulletin:

[EXTERNAL LINK] - State Farm General Insurance Company®: California New Business Update

State Farm General Insurance Company®: California New Business Update

State Farm General Insurance Company®, State Farm’s provider of homeowners insurance in California, will cease accepting new applications including all business and personal lines property and casualty insurance, effective May 27, 2023. This decision does not impact personal auto insurance. 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.

We take seriously our responsibility to manage risk. We recognize the Governor’s administration, legislators, and the California Department of Insurance (CDI) for their wildfire loss mitigation efforts. We pledge to work constructively with the CDI and policymakers to help build market capacity in California. However, it’s necessary to take these actions now to improve the company’s financial strength. We will continue to evaluate our approach based on changing market conditions. State Farm® independent contractor agents licensed and authorized in California will continue to serve existing customers for these products and new customers for products not impacted by this decision.

 

[AZDave]

Wow, this is incredible.

Which state is in a worse situation for Agents: California or Florida? It's seems a close one.

 

[somarco]

Any idea what their market share is in Kali?

P&C is not my focus, but in the health insurance lines, when a carrier withdraws from a market renewals increase eventually sending that block into a death spiral.

 

[AZDave]

I am not a CA agent, but seems SF was one of the only companies able to write new bus. Maybe worried about adverse selection, they are now taking a giant break.

Who will be picking up the business out there?

I predict the Legislature will step in and fix this CA insurance problem once and for all....ha!

 

[Markthebroker]

Who will be picking up the business out there?

Me, lol.

 

[marindependent]

Any idea what their market share is in Kali?

"State Farm holds the largest share of property and casualty insurance policies in the U.S. and controls about 8.3% of California’s market, writing at least $7 billion in premiums, according to 2021 data compiled by the state."
Source

And I may add that - that data is from 2021. Certainly, in my opinon that market share has grown in 2022 and so far in 2023 as they have literally been almost the only game in town.

One late addition here: Those are not the trending new sales though. For much of the areas here in CA - State Farm had to be writing upwards of 30% to 40% of the new business. [No data here just professional experience.] New sales AND nonrenewals being placed with them. [And I believe that that was part of the problem.] Therefore I am really not sure where the San Francisco area goes from here for new home purchases.

 

[Markthebroker]

"State Farm holds the largest share of property and casualty insurance policies in the U.S. and controls about 8.3% of California’s market, writing at least $7 billion in premiums, according to 2021 data compiled by the state."
Source

And I may add that - that data is from 2021. Certainly, in my opinon that market share has grown in 2022 and so far in 2023 as they have literally been almost the only game in town.

Yep. Key word is "been". As in past tense.

 

[marindependent]

And the Insurance Journal now comes out with a much better article about State Farm Halting home insurance issuance in California.

This article seems to consider inflation a bigger component than the wildfire risk [which is not necesarily my opinion.]

"An insurer group was quick to respond over the weekend after State Farm announced it will cease accepting new applications for business and personal lines property/casualty in California to deal with increased risks and higher construction costs.

The American Property Casualty Insurance Association on Saturday blamed inflation for increasing the costs of claims and said that insurers need higher rates along with other market improvements to deal with increased risks and costs in the state."
...
"Mark Sektnan, APCIA vice president for state government relations, put the cost of claims being driven by inflation as first on his list of reasons why the property market in California is struggling.

“The reality is inflation has increased the cost of every aspect involved in an homeowners insurance claim. It is costing more and taking longer to rebuild homes after a covered loss,” he said. "
...
"Insurers need “greater stability and regulatory flexibility” to handle the difficult market conditions and manage evolving risk, he added.

“The first step is making sure insurers can charge rates that reflect the increasing risk of loss. CDI is working on this,” he said. “Next, we need to allow admitted insurers to include the cost of reinsurance in their rates and use forward-looking probabilistic models to accurately assess future risk. Finally, we all have one common goal: mitigate properties and reduce the risk.”

Full Article here.
#StateFarmHomeInsurance #RicardoLara

 

[tikibarrister]

Must really suck if you sunk your life savings into opening a new scratch agency in CA this year.