ABC - KXTV - Insurance Crisis - Liberty Mutual Makes Changes

Published Date: 01/17/2024

Liberty Mutual Pulls Business Owner Policies in California: What It Means for Small Businesses

California’s insurance crisis is no longer confined to homeowners.

In yet another sign of deepening market strain, Liberty Mutual announced that it will stop offering its Business Owner’s Policy (BOP) — a bundled commercial insurance product that covers small businesses — across the state this fall.

The decision, first reported by ABC 10 Sacramento’s To The Point with Alex Bell, marks a major retreat by one of California’s largest commercial carriers.

“Another insurance company is making changes,” Bell reported. “Liberty Mutual sent a letter to agents and brokers saying that this fall, they’ll no longer offer their bundled insurance products for businesses called BOP.”

The change takes effect October 1, 2024, and by December, the company plans to non-renew its entire book of existing BOP policies — meaning thousands of small businesses will need to find new coverage before year’s end.

1. What Liberty Mutual Is Cutting

Liberty Mutual’s Business Owner’s Policy (BOP) is a staple product for small and midsize enterprises. It combines property, liability, and business interruption coverage into one streamlined package.

The BOP is commonly used by:

• Small retail shops
• Professional offices
• Restaurants and cafes
• Service providers like salons, studios, and clinics

As Bell explained:

“These types of policies cover small office, retail, and restaurant spaces.”

After October 1st, Liberty Mutual will stop writing new BOPs — and by December, existing ones will begin to non-renew.

“The real scary part,” said an insurance expert interviewed by ABC 10, “is that they announced they’re going to start non-renewing the entire book of business for that classification.”

That means every policyholder under this category — even those with clean claims histories — will be dropped.

2. Why Liberty Mutual Says It’s Leaving

In its letter to agents, Liberty Mutual cited California’s “adverse market conditions” as the reason for the pullback.

The company, like many others, is struggling with:

• Inflation-driven claims costs
• Rising reinsurance prices
• More frequent and severe weather events
• An outdated regulatory system that limits pricing flexibility

As ABC 10 summarized:

“Like other companies, they’re blaming the decision on California’s adverse market.”

A spokesperson for the California Department of Insurance (CDI) confirmed the change and noted that while Liberty Mutual remains a major player in the state, this particular product line — BOP — represents only about 1% of its total commercial business.

Still, that small slice covers thousands of small business owners who will now need to find new policies in an increasingly competitive market.

3. The Non-Renewal Problem

While the BOP withdrawal may sound limited, it’s part of a broader pattern.

Over the past year, major insurers like State Farm, Allstate, and Farmers have scaled back their homeowners and commercial offerings, citing unsustainable losses.

Now, commercial lines are feeling the pressure too.

“Basically anyone that has a policy with them — one of those types of policies — starting in December of this year is going to get non-renewed entirely,” the ABC 10 expert said.

That means no renewals, no grace periods, and no easy alternatives.

Even businesses with long relationships with Liberty Mutual will need to shop for replacement coverage — likely at higher prices and with tighter underwriting.

4. A Broader Market Breakdown

Liberty Mutual’s exit from the BOP market is not an isolated event. It’s part of a systemic insurance market contraction that’s rippling across all sectors in California.

ABC 10 also reported that another major insurer is “considering leaving the state altogether” if it cannot reach agreement with regulators over rate flexibility and risk modeling.

“All of the models that they’ve had in the past to try and predict things and properly come up with a rate for the risk,” Bell noted, “have pretty much gone out the window.”

In other words, traditional actuarial tools — based on decades of predictable weather, economic stability, and loss data — no longer work in California’s current environment of climate volatility and inflation.

5. The Science (and Politics) of Pricing Risk

California’s regulatory system, built under Proposition 103 (1988), prevents insurers from using forward-looking models to calculate risk. Instead, rates must be based on past losses — even though wildfires, floods, and atmospheric rivers are far more severe today than historical data suggests.

For insurers, this means a mismatch between what they charge and what they pay out.

“Unbelievable weather events that have been happening — all of the models that they’ve had in the past to predict things have gone out the window,” the ABC segment emphasized.

That gap explains why carriers are scaling back, pausing new policies, or exiting entirely. It’s not just about profitability — it’s about solvency.

As seen in other recent cases, including State Farm’s request for a 30% homeowners rate increase, insurers are warning regulators that without adjustments, they cannot keep operating sustainably in the state.

6. What This Means for Small Businesses

The immediate impact of Liberty Mutual’s decision will fall on California’s small business community — already dealing with rising rents, labor shortages, and post-pandemic recovery.

For many, insurance isn’t just a safety net — it’s a legal requirement. Landlords and lenders often mandate proof of coverage, and going uninsured can risk eviction or contract termination.

“It’s a scary situation,” said one agent familiar with the matter. “For businesses that rely on these bundled policies, it’s going to be a scramble to find affordable replacements.”

The problem is compounded by limited competition. As carriers leave, remaining insurers are inundated with applications, leading to:

• Longer approval times
• Higher premiums
• Stricter underwriting

In short, small businesses are caught in the same hard market that homeowners have been facing for months.

7. The Ripple Effect

When insurers pull out, the effects extend beyond policyholders.

Local economies suffer as:

• Business owners delay expansions or renovations because of coverage uncertainty.
• Property owners struggle to meet insurance requirements for financing.
• Lenders tighten credit, wary of uninsured collateral.

It also puts pressure on the California FAIR Plan’s commercial division, though that program is not designed for widespread participation. FAIR Plan coverage is expensive, limited, and lacks the comprehensive features of a BOP.

8. The State’s Response

The California Department of Insurance acknowledged Liberty Mutual’s changes but emphasized that the company “remains committed” to the state and continues to offer other commercial products.

“This product represents 1% of the Liberty Mutual Group’s entire commercial book,” the department told ABC 10. “They remain one of the largest commercial carriers in California.”

The Department also reiterated its call for businesses and agents to reach out for assistance.

“If you have questions about your insurance or your policy,” ABC 10 advised, “you can contact the California Department of Insurance at 1-800-927-4357 or visit insurance.ca.gov.”

Still, regulators face growing criticism for not acting fast enough to modernize California’s system. While Insurance Commissioner Ricardo Lara’s “Sustainable Insurance Strategy” promises reforms like catastrophe modeling and faster rate approvals, those changes won’t fully take effect until late 2024.

For small business owners losing coverage this fall, that’s too long to wait.

9. Navigating the Transition: What Businesses Should Do Now

If you’re a Liberty Mutual BOP customer or a small business owner in California, here are steps to take right away:

✅ 1. Talk to Your Agent or Broker Immediately

Ask when your policy will non-renew and what replacement options exist. Independent brokers can access markets beyond major carriers.

✅ 2. Start Shopping Early

Don’t wait until renewal — start seeking quotes now. The market is tight, and approvals take time.

✅ 3. Consider Specialty or Regional Carriers

Smaller insurers or excess & surplus (E&S) lines carriers may offer niche solutions for your business class.

✅ 4. Review Your Coverage Needs

Use this as an opportunity to re-evaluate limits, deductibles, and optional coverages.

✅ 5. Document Risk Mitigation

Businesses that install fire suppression systems, update security, or reduce exposures can sometimes negotiate better terms.

10. The Broader Outlook

Liberty Mutual’s exit underscores a larger truth: California’s insurance system — for both residential and commercial coverage — is at a breaking point.

Without reforms that balance predictive modeling with consumer transparency, insurers will continue to pull back, leaving more Californians — homeowners and business owners alike — scrambling for coverage.

But there’s also a glimmer of hope.

Regulatory modernization is underway, catastrophe modeling is finally on the table, and dialogue between state leaders and insurers is more active than it’s been in years.

Still, for small business owners watching their renewal dates approach, the crisis feels far from theoretical.

“It’s one thing when insurers stop writing homes,” said one agent. “But when they start walking away from small businesses — that’s when the economic ripple really begins.”

The Bottom Line

Liberty Mutual’s decision to drop its Business Owner’s Policy in California is a warning sign of how deep the insurance crisis has become.

For small businesses, it means uncertainty, higher costs, and the urgent need to explore new coverage options. For regulators and lawmakers, it’s another wake-up call that reform can’t wait.

As ABC 10 reminded viewers, resources are available through the California Department of Insurance (insurance.ca.gov) — but navigating this environment will require vigilance, planning, and partnership with trusted advisors.

Because in today’s market, the best insurance strategy is being prepared for change.