State Farm Insurance has announced it will no longer be offering new home insurance policies in California due to the increasing risk of wildfires and rising construction costs.
The insurance company blamed his decisionThe statement, which went into effect immediately on Saturday, referred to “historic, above-inflation increases in construction costs, rapidly growing catastrophe risk and a challenging reinsurance market”.
The change is necessary “to improve the financial strength of the company”.
People who already have household contents insurance are not affected. The decision has no impact on private car insurance.
Robert Galbraith via Reuters
State Farm is one of the state’s largest insurance companies and reportedly paid out more home insurance premiums to California residents in 2022 than any other company Insurance Information Institute.
The company’s decision comes as California’s wildfires continue to become more frequent and violent.
The state’s deadliest wildfire, the Camp Fire in 2018, destroyed nearly 19,000 structures, devastated about 153,000 acres and killed 85 people. according to CAL Fire. The state’s largest fire, the August Complex Fire, occurred in 2020 and destroyed 1 million acres of land.
Experts have warned Wildfire activity this season could also be particularly extreme. Any new plant growth from this winter’s heavy rains will likely dry up in the summer, creating more fuel for fires.
Meanwhile, insurance companies are trying to cut their homeowner insurance policies in the state.
The wildfires of 2017 and 2018 alone wiped out a full quarter century of insurance industry profits. The New York Times reported.
Allstate Insurance Also announced in 2007 that it would stop selling new home insurance in California and increase the price for its remaining customers due to wildfires and earthquake-induced fires.
American international group also cut thousands of its wealthy clients last year, The Wall Street Journal reported.
To protect homeowners, the California Department of Insurance introduced a mandatory requirement one-year moratorium about insurance companies terminating or refusing to renew certain home insurance plans after a state of emergency was declared due to a wildfire disaster. Insurance companies are also required to do this grant discounts for homes and businesses taking extra precautions to protect against wildfires.
