Farmers Insurance won't increase California homeowner policies
Yet another major insurance carrier is limiting its California coverage.
Farmers Insurance, the state’s second-largest homeowners carrier, is capping its new homeowners policies here starting this month.
“Effective July 3, Farmers will limit new homeowners insurance policies in California to a level consistent with the volume we projected to write each month before recent market changes,” it wrote in an emailed statement. The company cited “record-breaking inflation, severe weather events, and reconstruction costs continuing to climb” as factors. The news was first reported by the SF Standard.
Those “recent market changes” are a clear reference to the recent moves by Allstate and State Farm to stop writing new policies in the state. In other words, Farmers is declining to pick up the slack left by its two rivals.
Allstate and State Farm cited rising costs of rebuilding and the increasing risk of wildfires for their decisions to cease issuing new policies in California. At least two other insurers, AIG and Chubb, which cater to high-end homes, have also pulled coverage for some customers in recent years.
Farmers accounts for 7.8% of California property policies, while State Farm has 8.7% and Allstate has 5.1%. Together, the three have 21.6% of the California market with about 19.4 million premiums, according to 2022 figures from the California Department of Insurance.
Insurance regulators downplayed the significance of Farmers’ move, noting that continuing at its current level still means that it will write a significant number of new policies.
“The Department of Insurance understands Farmers has been writing 7,000 monthly new homeowners policies on average,” Michael Soller, a spokesman, wrote in an email. “So this is not a departure. We do not expect their footprint in the state to change significantly one way or another. By maintaining its historic average of new homeowners policies in California, Farmers is showing its continued commitment to the Golden State for the long haul. “
The department acknowledged the toll of climate change fueled wildfires. It plans a workshop on July 13 “to explore risk assessment models that can help address the threats of climate change.” That stilted language refers to something insurers desperately want: a change in regulations that would let them use forward-looking models to assess wildfire risks , rather than having to base prices on the past 20 years.
But regulators say that if they give insurance companies these new tools, they want something in exchange: a pledge to provide and maintain homeowners and commercial policies.
Farmers did not respond to questions about whether it is declining to coverage older buildings.
While there are more than 100 insurance companies doing business in the state, some worry that the decreasing availability of new homeowner policies could mean higher premiums, adding yet another cost to buying a home.
Consumer advocates say that the decision to stop writing new policies in California could be a tactic to pressure the state to decrease regulation and allow companies to boost rates. Insurers say the state’s slow rate approval process and strict regulations have hurt their ability to take on more customers.
For homeowners unable to find insurance — especially in fire-prone areas — the state offers the FAIR Plan, which is a temporary safety net and “last resort” plan that covers only fire insurance and typically costs more than other plans.
Source: San Francisco Chronicle
