State Farm Cuts 72,000 California Home and Apartment Insurance Policies
Bidenomics and California’s regulatory overreach is to blame.
As Professor Jacobson has noted, “There’s that saying that collapse happens slowly, then suddenly.”
We may have just entered a phase of California’s collapse.
Legal Insurrection readers may recall that about a year ago, I noted State Farm was no longer accepting applications for new homeowner insurance policies in California. The largest home insurance company has just announced it will discontinue coverage for 72,000 homes and apartment policies in the state starting this summer.
Bidenomics and California’s regulatory overreach is to blame.
The insurer blamed inflation, regulatory costs, and the increasing risks from catastrophes for its decision to scale back in the blue state.
“This decision was not made lightly and only after careful analysis of State Farm General’s financial health, which continues to be impacted by inflation, catastrophe exposure, reinsurance costs, and the limitations of working within decades-old insurance regulations,” State Farm announced in a March 20 statement.
“State Farm General takes seriously our responsibility to maintain adequate claims-paying capacity for our customers and to comply with applicable financial solvency laws. It is necessary to take these actions now,” it continued.
The company said those impacted will be notified between July 3 and Aug. 20.
In response, California’s insurance commissioner Ricardo Lara wants to…investigate the insurance company’s finances.
“This is a real crisis,” Commissioner Lara told KABC in an interview Friday.
The commissioner said he wants to investigate State Farm’s finances, but warned that regulators can’t go too far, or else they would risk pushing companies out of California entirely.
“Insurance companies are not like utility companies,” he told KABC. “By law, they don’t have to be here, and when we try to overregulate, we’ll see what happened after the Northridge earthquake, when the legislature came in and tried to overregulate, and they no longer write earthquake insurance in California.”
Lara is spearheading an effort to enact the largest insurance reform in more than 30 years in California. He has proposed new regulations intended to change the models that insurance companies use to assess risk from catastrophes like wildfires or earthquakes, which he claims will stabilize premium costs and expand coverage.
Meanwhile, homeowners whose policies are not being renewed are told to use the state’s insurance option, the California Fair Plan.
- Customers should shop for another insurance policy by asking for recommendations from trusted sources or seeking an independent insurance agent.
- Utilize the California Department of Insurance shopping tools available on their website.
- Compare multiple policies, shop smart and choose the best coverage that suits your needs.
- Call the state’s insurance consumer hotline at 800-927-4357.
- Buy insurance through the California Fair Plan if you strike out in the normal marketplace.
The state creates wildfire problems through poor land management and eco-activist policies based on pseudoscience, then rakes in the money for insuring people against those problems.
The pace of the collapse will really quicken when there is another massive wildfire, which is very likely to occur as utility companies are being forced to divert funds into green energy nonsense rather than fire mitigation activities.
Some of our regulators are actually anticipating the consequences.
At a legislative hearing last week, Victoria Roach, president of the FAIR Plan Assn., warned lawmakers that the insurer of last resort had a surplus of only $200 million and was at risk of financial instability should a catastrophic event occur.
“We grew another $10 billion in exposure in January and another $15 billion in February,” Roach told lawmakers. “So the numbers just continue to climb, which is a concern — as those numbers climb, our financial stability comes more in question and we come closer to an assessment of the market should we, knock on wood, have a catastrophe.”
“We’re one bad fire season away from complete insolvency — it feels like a big gamble in many ways,” said Assemblymember Jim Wood, a Democrat from Sonoma County. “If this were on Wall Street, I’m not sure you’d be able to get away with this.”
No band-aid for this problem is currently being offered that actually addresses the underlying causes of inflation and regulatory overreach that led to State Farm’s decision in the first place.
Add this to the long list of many reasons people are fleeing the once Golden State.
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Comments
Suddenly indeed. I’m afraid the gradual part is about over.
And I believe the quote Professor Jacobson was referencing is from The Son Also Rises by Ernest Hemingway.
Oops…..the Sun.
They can both rise, only in different ways.
I thought that was an Easter reference.
CA facing lost decade under dem super majority. Move out if you can.
Wait for it……with a shuffle of feet and an unsteady gait, BIDENSURANCE will come to the rescue!!!
Courtesy of the rest of the country.
I don’t know WHO would downvote that.
Our random Down Voter. Sometimes they decide to downvote every comment by a single person. Sometimes it’s just one here or there.
At American Thinker they allow anyone to see who voted up or down. That might be useful on this site also.
Our favorite L-I editors probably have access to that information.
Fuzzy Slippers might share.
Right Fuzzy?
(We promise to keep it among ourselves only, confidential-like.)
With any luck, California will be forced into insolvency, and Trump will be in office to appoint a receiver.
Where is America’s Javier Milei?
And appoint special prosecutors, California has a lot to answer for.
And a Independent Monitor to make sure Newsom isn’t pulling any shenanigans with the states finances.
Lefty ideologues don’t heed rational warnings or seem to care about the potential negative consequences of their failed policy preferences, even when those consequences are an imminently foreseeable result. At least not until those negative consequences are either about to occur with no hope of avoiding them or as here have already occurred.
If y’all choose to continue to reside in a Blue State eventually the lefty ideologues will make a mess of things and you will be left holding the bag. Get out before that happens to you, preferably while you can still sell your home and business.
Unfortunately the damage won’t be limited to CA. As these homes and other properties become either under insured or unable to acquire insurance coverage the risk to the underlying asset for the loans will become a problem. That will to some degree act as a drag on real estate value, which impacts the value of the loan which impacts the rating of the institutions who hold the loans. Plus all the ancillary impacts of that ecosystem. Then if there is a huge wildfire or whatever else and it depletes the available pool of insurance of last resort offered by CA…..things get even more spicy.
That will to some degree act as a drag on real estate value
How much will that be restricted to California because of its horribly inflated housing prices? What proportion will hit outside CA? And will the banks foresee this and start weaning themselves from CA mortgages? (Banks, foreseeing an asset class problem? /shakes my head in despair/)
Yep. Who holds the mortgages on these uninsured or under insured properties? Guaranteed it ain’t all held by CA banks/funds. Lots of potential ripples here and all sorts of secondary, tertiary impacts well beyond the borders of CA.
Someone familiar with Ca can confirm, but in other states, once you’ve been rejected by ~3 carriers, you can shop the surplus market.
The surplus market is not backed by the state insurance fund, so if they go bankrupt, other carriers are not stepping in.
I’ve had to shop my referred customers who were non-renewed by state farm due to claims on the surplus market. Sometimes it’s actually cheaper than the domestic market. These policies are not subject to all the bullshit rules set by the state.
It is a giant n0-no to shop there w/out being rejected by a decent number of domestic (ie in state) carriers. You have to do this with an independent agent because your typical captive agent can’t do it.
Like a good neighbor.
State Farm is not there.
How long before California is also Not “In Good Hands with Allstate?”
California is not a good neighbor to start with.
Also- gotta love Hot Air’s article on Biden driving migration.
All but 3 counties in TN grew… the 3 that shrunk all voted for Biden.
Send them the illegals
Send them collect.
Did I read correctly that Cali’s backstop govt insurance system is collapsing as well?
Can’t speak for California, but Florida’s government insurance program is collapsing.
Fed agency USFS owns and controls most of the Sierra-Cascade mountain forestlands here in Calif. The State generally controls valley parks and some coastal mountain parks.
The North Complex fire, one of the top four worst wildfires, started due to a nasty electrical storm with dozens and dozens of dry lightning strikes in very remote, unpopulated and rugged terrain in the Plumas national forest. The result was much of it burned uncontested; a catastrophe of epic proportions.
Just a little speed bump in the road to The Workers’ Paradise. Bill Handle (lawyer), on KFI, had to redo his home insurance… simple… at twice what it was before. At least he found some. Handle had said in the past that once he retires he will leave California. I’ve chatted with several Californians… they would move if they could afford it. The Left sees California as great because of them….. California was great in spite of them, but even all the natural qualities of the state can’t overcome this. The fall really became evident starting in 1986 with the First (and promised only) Amnesty. Just what does the Left think this will all look like after Cloward and Piven?
Which is most likely true?
1. State Farm is the only company that will cut policies in California and they are not likely to cut any more.
2. State Farm is the first company to cut policies in California so far and they are just getting started..
Others are finding ways to reduce exposures.
USAA has all but cut stakes. Others are doing snakey stuff like getting drones out and snooping around your yard for hazards. That is not limited to Ca though- I’m seeing on forums carriers using satellite photos to critique the age and condition of roofs.
So all Cali homeowners who have ongoing mortgages, which all require continuous insurance coverage, are through no fault of their own, going to be transformed into defaulters under the terms of their mortgages if they cannot obtain replacement policies. What then??? Or are there insurers of last resort who focus on such dire circumstances, like the high risk pools of auto insurers? Minimal coverage, top dollar premiums?
Gavin Newsom, call your office.
Grab ‘em Nuisance thinks he will be president by the time the SHTF. It will be someone else’s problem.
Insurers of last resort? Yes. California, itself. And that fund is going to go underwater soon, with this sort of thing.
“…through no fault of their own…” Some, maybe, but the majority are just getting what they voted for.
Even those few that didn’t vote D, have more than enough warnings. If they choose to stay there, and through their labors and taxes support the leftist rulers, then I can work up no real sympathy for them.
I half have this attitude. I paid WAY more than I wanted to in order to get my family out of Wa. We could have stayed and built our little bubble and forged a sliver of happiness in a sea of hell, the public safety issue was overhwhelming – like seeing cars next to us getting bashed in by hit and run drivers on the road. Literally a MadMax dystopia.
After we pulled our kid from Inslees BLM/Tranny/LGBTQ school system, the wife’s angst went down a bunch. She formed a good community amongst homeschoolers. However if you check local news up in Renton Wa- a minivan with a mom and homeschooled kids was murdered by a guided missile going 112 on a surface street. I’ve read about tons of families getting killed by these lawless missiles. So that family- they think and believe the same as us- they just couldn’t make the move out of state. So it’s with great sadness that I watch all of this unfold- even though I do agree with you that most voted for exactly this.
Evil doesn’t choose its prey that way unfortunately.
But the weather is still great! So glad I escaped to Idaho three years ago.
“The state creates wildfire problems through poor land management and eco-activist policies based on pseudoscience, then rakes in the money for insuring people against those problems.”
When it comes time to pay out claims, I’m sure they will be generous.
Bwa ha ha ha ha ha ha ha!
Yeah the other potential issue with a ‘generous’ payout from CA State insurance option beyond the lack of sufficient funds is the crying and moaning for a Federal Gov’t bailout.
I could easily imagine leftists pointing to this situation with the Insurance Companies pulling out based on the unique risks created by the State of CA polices that don’t allow mitigation and blaming ‘the market’ then pushing for a massive Federal Govt insurance scheme to be created.
They’ll demand “national” insurance pools from “greedy” insurance companies so a person in Vermont has to subsidize risk 2500 miles away.
Yep a reinsurance backstop by the federal government is unfortunately well within the realm of possibilities. Worse would be an indemnification of losses after the fact when a wildfire, mudslides earthquake or whatever else hits uninsured or under insured properties. At least with a federal insurance plan folks would have paid in premiums like the hurricane insurance which is pricey but if that’s the only option then you pay it or suck it up when a hurricane does hit you.
those impacted will be notified between July 3 and Aug. 20
IOW, during brush fire season. That is gonna suck.
regulators can’t go too far, or else they would risk pushing companies out of California entirely
I think this is a place I can safely say, “Too late!”
Lara is spearheading an effort to enact the largest insurance reform in more than 30 years in California.
Re-worded for reality-based readers:
Lara is spearheading an effort to try and force insurance companies to not actually do risk-based policy writing, so they can put all their citizens on the insurance dole.
Something for California to ponder: State Farm is still underwriting home policies in Florida, but dropping California entirely. California does not have hurricanes.
You can bet the Governor’s Mansion is covered in full plus those of Newsom’s Cronies
I look at this as a good thing. State Farm has to be dragged kicking and screaming into settling claims of any kind. Their present customers can do better.
It’s always pissed me off that there are some types of insurance you’re required by law to carry but the government doesn’t require the insurance companies to pay claims in a timely manner without lawsuits.
There are few options and more costly…if you can get one. Present customers really can’t.
Its funny reading this, Florida has the same issue. Oh dear
Except State Farm is still underwriting homes in Florida.
And lol, that doesn’t negate the broader point does it.
Considering the regulatory environment and the potential for claims, I’d say this is just good business.
The California Department of Insurance, with an elected Commissioner and under the guise of being pro-consumer, is one of the most politicized and corrupt such agencies in America. Companies are wise not to do business there or to get out if they do.
And yet millions of morons (some dead, some alive)
will still vote for Biden! 🙁
One of the many things during 40 years in the automotive repair business, is that you don’t need customers that cost you money.