Insurance company State Farm projects it could drop more than one million California policies over the next five years due to impending financial instability.
June filings submitted to the California Department of Insurance found that if the insurance company continues to decline, its sector involving property insurance, comprised of homeowner’s insurance and business liability, could face a total policy count drop from 3.1 million to under 2 million in just five years, the San Francisco Chronicle reported.
Founded in 1922, State Farm is the third most popular insurance brand in the United States, according to YouGov. It serves more than 91 million policies and accounts in industries including auto, fire, life, health, commercial, and financial services.
The insurance company is California’s largest home insurer. It serves more than 1.2 million homeowners in residential or business properties and has additional customers in condo homeowners associations.
The policy drop reflects a decline in customers staying with the company, either choosing not to renew or canceling due to non-compliance.
In a press release in March, the insurance company announced it would not renew approximately 30,000 homeowners, rental dwelling, and other property insurance policies and would withdraw from offering commercial apartment policies with the nonrenewal of approximately 42,000 policies in the state of California, starting in July.
State Farm General noted that these policies combined comprised 2 percent of the insurance company’s policy count in California.
Newsweek reached out to a spokesperson for State Farm for comment via email.
State Farm headquarters in Bloomington, Illinois. New filings revealed that State Farm projects it will drop more than 1 million policies in California in just five years.
Steve Smedley/Associated Press
State Farm General also projected a significant surplus decrease by 2028.
To save its surplus, the insurance company is raising rates by 30 percent for homeowners, 36 percent for condominium owners and 52 percent for rental homes. According to filings, the increased rates will appear on customers’ bills as early as 2025.
California has a high rate of policy cancellations and pullbacks by insurers within the state after major wildfires and disasters, and State Farm General is not the only company to refuse renewals following wildfires in 2017 and 2018, instances which they noted as detrimental to regaining the company’s financial footing in the filings.
Liberty Mutual Fire Insurance company also refused to renew the policies of 17,000 state homeowners with “fire insurance” policies from September through November of last year.
However, Liberty Mutual claims that it did not renew nearly 20,000 customers because its new technology system was ill-equipped to handle such policies following the replacement of its old system and that the decision was not related to the prevalence of wildfires.
California residents suffered another blow as insurers withdrew from the state. Allstate increased insurance premiums for homeowners by an average of 34.1 percent in August after the state permitted it to do so, allowing one of the highest rate increases of major companies since 2021 to go through.
State Farm also increased insurance premiums for homeowners in California by 20 percent this year following its announcement about nonrenewal in March.
The homeowner’s insurance crisis in California has greatly affected the housing market. As insurance premiums increase, properties are plunging to low prices.
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