State Farm, America’s biggest car and home insurer by premium volume, will halt the sale of new home insurance policies in California, citing wildfire risk and inflation of construction costs.
The company will not accept insurance applications for business and personal lines property and casualty insurance, but will still accept auto insurance applicants.
Why it matters: State Farm cites historic increases in construction costs outpacing inflation, rapidly growing catastrophe exposure, and a challenging reinsurance market as reasons for the decision. The California department of insurance is working to protect homeowners, but a spokesperson acknowledged that the factors driving State Farm’s decision are beyond their control, including climate change, reinsurance costs affecting the entire insurance industry, and global inflation.
- American International Group (AIG), a multinational insurance company, also notified thousands of California homeowners last year that their policies would not be renewed due to wildfires.
- California saw 7,490 wildfires in 2022, an increase from the previous year, and the severity of wildfires has destroyed homes, caused injuries and deaths, and worsened air quality.
- The climate crisis has exacerbated the issue of wildfires, especially in California, which has become warmer and drier, causing the state’s wildfires to be more frequent and intense.
- Existing customers insured by State Farm will not be impacted by the decision.
What they’re saying: “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 insurer said in a statement.
- “The factors driving State Farm’s decision are beyond our control, including climate change, reinsurance costs affecting the entire insurance industry and global inflation,” a California department of insurance spokesperson said.
