State Farm to Non-Renew Thousands of Property Policies in California Amid Market Challenges

State Farm General Insurance Company is set to non-renew approximately 30,000 homeowners, rental dwelling, and other property insurance policies in California, marking a significant move in the insurer’s strategy within the state. This decision follows last May’s halt on issuing new homeowners policies, driven by exposure concerns and a challenging reinsurance market. The insurer will also exit the commercial apartment policy sector, affecting an additional 42,000 policies, a move indicative of the broader challenges facing the insurance industry in California.

These policy changes, affecting just over 2% of State Farm General’s California policy count, are scheduled to roll out starting July 3, 2024, for various property policies, and August 20, 2024, for commercial apartment policies. This action stems from an in-depth review of the company’s financial stability, influenced by factors like inflation, natural disaster exposure, rising reinsurance costs, and outdated regulatory frameworks. Despite these changes, State Farm emphasizes its dedication to fulfilling its financial and legal responsibilities to customers, ensuring sufficient resources to cover claims.

The company acknowledges the Insurance Commissioner’s proposed regulatory reforms, which aim to streamline the rate application process and better account for modern financial realities in insurance rates. State Farm commits to working with California’s Department of Insurance and policymakers to pursue these reforms, seeking an environment where insurance rates more accurately reflect risks.

Impacted policyholders will be notified before their policy expiration dates and provided with guidance on securing alternative coverage. State Farm’s independent agents in California will continue to support policies not subject to these changes. The company’s stance on new applications remains unchanged since May 2023, with a commitment to reassessing its business strategies as market conditions evolve.