State Farm General Insurance Company has announced that it will non-renew approximately 30,000 California homeowners, rental dwelling, and other property insurance policies.
If you recall, last May, the insurer halted new homeowners policies being issued in the state, citing exposure related issues and a challenging reinsurance market environment.
However, State Farm General has also decided to exit the commercial apartment policy sector, affecting an additional 42,000 policies.
“These actions are California-specific and will occur on a rolling basis over the next year, beginning on July 3, 2024, for homeowners, rental dwelling, residential community association and business owners policies and on August 20, 2024, for commercial apartment policies. Combined, these policies represent just over 2% of State Farm General’s policy count in California,” the announcement states.
From what we understand, the decision comes as a result of an exhaustive review of State Farm’s financial stability, which has been significantly affected by a number of factors, including inflation, exposure to natural disasters, increasing reinsurance costs, and outdated regulatory frameworks.
Additionally, the firm stresses its commitment to upholding both its financial responsibilities and legal obligations to customers while ensuring it has sufficient resources to cover claims.
Further, State Farm also stated that it recognises the Insurance Commissioner’s proposed regulatory reforms, such as streamlining the rate application process, accounting for catastrophe modeling and reinsurance costs in rates, as well as addressing FAIR Plan vulnerabilities.
“We will continue to work constructively with the California Department of Insurance, the Governor’s Office, and policymakers to actively pursue these reforms in order to establish an environment in which insurance rates are better aligned with risk,” the announcement states.
State Farm explained that impacted policyholders will be informed ahead of their policy expiration dates, offering guidance on alternative coverage solutions.
At the same time, State Farm’s independent agents in California will continue to support policies not subject to these changes.
The organisation’s General’s May 2023 decision regarding new applications remains unchanged.
State Farm said that it will evaluate the need for any additional business actions as market conditions change.
