AgentCaliforniaReal Estate

State Farm no longer accepting homeowner insurance applications in California

Homeowners with existing State Farm policies will not be impacted

Insurance giant State Farm announced last week that is no longer accepting homeowner insurance applications in California. The policy came into effect on Saturday, and it impacts anyone seeking a new business and personal lines property and casualty insurance policy in California.

The company said it will continue to serve existing customers and the new policy does not impact personal auto insurance policies.

“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,” the company wrote on its website.

Since the start of 2023, CAL FIRE and the US Forest Service have recorded 1,205 wildfires in the state, which have burned a total of 1,233 acres. On a year-to-date basis, over the past five years, the two organizations have recorded an average of 2,015 wildfires a year in California.  

This five-year window includes the state’s deadliest fire ever, the November 2018 Camp Fire, which nearly destroyed the town of Paradise, left 86 people dead and destroyed 18,804 buildings.

“Every home, every little business, there were a few that made it along the main streets, but other than that, at least 95-98% of the residential housing in the area was gone,” local eXp Realty agent Mike Stearns told HousingWire in December 2021.

While the fire certainly put many people off living in Paradise, local agents said homebuyers were returned to the town despite its history.

“I think that [the threat of fire] is the biggest hurdle in getting people to go back or getting new people to the area,” Shane Collins, a RE/MAX agent in the neighboring city of Chico said in December 2021. “The people who do end up buying here, it is slightly more affordable and that kind of pushes them into deciding to buy here.”

State officials in California have attempted to minimize efforts like State Farm’s by temporarily barring insurers from dropping customers in areas hit by wildfires and directing insurance companies to provide discounts.

“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,” State Farm wrote.

The company said the measures were necessary to improve its “financial strength,” and it added that it would continue to evaluate its approach “based on changing market conditions.”

Californians can still access FAIR Plan Association, which functions as the state’s insurer of last resort but it only provides fire-related coverage. Any additional coverage for theft, earthquake, flood will require wrap-around insurance.