(Airdate: 2024-03-21) ABC - KXTV - State Farm not renewing 70K+ insurance policies in California
Published Date: 03/21/2024
State Farm’s Latest Move: What the Non-Renewal of 72,000 Policies Means for California’s Insurance Market
California’s insurance market is once again in turmoil. On March 21, 2024, State Farm, the state’s largest property insurer, announced that it will not renew over 72,000 insurance policies across California — citing a need to “ensure its long-term sustainability.”
This announcement marks another blow to a housing market already struggling with rising premiums, shrinking coverage options, and growing dependence on the state’s FAIR Plan.
Let’s break down what this decision means, who it affects, and what California homeowners and business owners can do next.
The Announcement: 72,000 Policies Dropped
According to ABC10 Sacramento, the decision affects both residential and commercial customers:
- 30,000 homeowner, rental dwelling, and property policies
- 42,000 commercial apartment policies
That’s more than 72,000 total non-renewals, representing roughly 2% of State Farm’s policy count in California.
While that percentage may seem small, the impact is huge — particularly in areas already struggling to find private coverage.
“State Farm announced they will not renew 72,000 policies in California to, quote, ‘ensure its long-term sustainability,’” ABC10 anchor Becca Habegger reported.
In plain terms: the company is trying to prevent deeper financial losses caused by skyrocketing reinsurance costs, inflation, and catastrophic weather events.
Who’s Affected — and When
State Farm’s move primarily affects two groups:
- Homeowners and landlords with single-family or small rental properties
- Commercial apartment property owners with larger buildings or complexes
Affected customers will begin receiving non-renewal notices well in advance of their policy expiration dates.
State Farm says it has been in communication with the California Department of Insurance (CDI) about the decision, and the department has encouraged the company to notify customers early and assist them in finding alternative coverage.
The Official Reason: “Ensuring Long-Term Sustainability”
In its public statement, State Farm pointed to several compounding pressures driving the decision:
- Historic wildfire losses and other climate-driven disasters
- Escalating costs of building materials and labor
- Rising reinsurance premiums — the insurance that insurance companies buy for themselves
- An outdated regulatory system that restricts the use of modern risk modeling tools
Collectively, these factors have made it nearly impossible for insurers to accurately price policies in California’s volatile environment.
“The company says these policies represent about 2% of their policy count in California,” ABC10 reported. “They’re doing this to ensure long-term sustainability.”
In other words, State Farm isn’t just cutting policies — it’s trying to survive in a market where the financial math no longer adds up.
A Familiar Pattern: Another Retreat from the Market
This latest move follows a pattern that has become all too familiar.
In May 2023, State Farm stunned the industry when it announced it would stop writing new homeowners, rental, and commercial property policies in California.
The company cited the same concerns — inflation, catastrophe risk, and regulatory barriers — and promised to focus on “existing customers.”
Less than a year later, that promise is faltering.
Now, with tens of thousands of renewals being dropped, State Farm joins a growing list of insurers — including Allstate, Farmers, Nationwide, and USAA — that have scaled back business or imposed stricter underwriting requirements.
The result? Less availability, fewer choices, and higher premiums for those who remain insured.
Why It Matters: A Market in Crisis
California’s homeowners insurance market is in what industry experts call a “hard market” — a period marked by high rates, limited availability, and tighter underwriting.
When major carriers pull back, the impact cascades across the entire system:
- Fewer insurers mean less competition, driving up prices.
- Remaining carriers face higher risk exposure, which they offset with more restrictive coverage terms.
- More homeowners are forced onto the FAIR Plan, the state’s “insurer of last resort.”
As of early 2024, the FAIR Plan covered over 350,000 homes — a number that continues to climb with each insurer withdrawal.
Insurance expert Karl Susman has described the situation as “the new normal” until California modernizes its regulatory system.
“When you have 90% of the insurance market not offering policies,” Susman explained in a prior KTVU segment, “you can imagine what the price is going to be for the rest of the 10%.”
Consumer Advice: “If You’ve Got Coverage, Hold On Tight”
ABC10’s segment ended with simple but powerful advice for California homeowners:
“If you’ve got it, grab it. Hold on tight because it’s very, very difficult — if not impossible — to get certain types of coverage.”
That’s not hyperbole. Brokers across the state report that new homeowner policies — particularly in wildfire-prone regions — are extremely hard to secure.
Many consumers are being turned away, redirected to surplus lines carriers (non-admitted insurers), or forced into the FAIR Plan.
If you’re currently insured, the best course of action is to protect that policy:
- Avoid missed payments or lapses — even one missed renewal can make you ineligible for reinstatement.
- Review your coverage annually to ensure it reflects rebuilding costs and updated risks.
- Work with a licensed insurance broker who can monitor changes and help you explore private alternatives if your carrier exits.
What the State Is Doing
The California Department of Insurance, led by Commissioner Ricardo Lara, says it has been working closely with State Farm to manage the fallout from this announcement.
The department released a statement reminding affected policyholders that help is available:
“If you are an affected State Farm customer, you can contact the Department of Insurance at 800-927-4357 or visit insurance.ca.gov for assistance.”
Lara’s office has also emphasized its commitment to implementing the Sustainable Insurance Strategy — a regulatory overhaul designed to modernize rate-setting and bring insurers back into the market.
One key element of that plan, set to roll out in 2024, will allow insurers to use forward-looking catastrophe modeling to better price wildfire risk — something that could eventually reduce volatility and encourage reentry.
“We’re seeing that as these regulations start going into place, and as carriers start entering the market and competing with one another, premiums will start coming down,” Susman explained in an earlier ABC10 interview.
The Bigger Picture: A System at Its Breaking Point
State Farm’s latest pullback underscores the fragility of California’s insurance ecosystem.
For decades, Proposition 103 — the 1988 law that requires insurers to get state approval for rate increases — has served as a consumer safeguard. But many industry experts now argue it’s ill-suited for a climate-driven risk environment where historical data no longer predicts future loss patterns.
That disconnect has led to a vicious cycle:
- Insurers can’t charge enough to cover projected risks.
- They stop writing or renewing policies.
- The FAIR Plan expands — but with higher rates and limited coverage.
Unless regulatory reform catches up with reality, California could face what some analysts call an “insurance availability crisis.”
What Homeowners Should Do Now
If you receive a non-renewal notice from State Farm or any other insurer, here are your next steps:
1. Contact Your Agent Immediately
Ask whether there are private-market alternatives available. Independent brokers can often access regional or specialty carriers that still write policies in your area.
2. Apply for the FAIR Plan if Needed
If no private options exist, apply through the California FAIR Plan Association. You can also purchase a Difference-in-Conditions (DIC) policy to supplement FAIR Plan coverage for water damage, theft, and liability.
3. Document Mitigation Measures
Keep records of any wildfire mitigation, home-hardening upgrades, or defensible-space certifications. These can help when seeking new coverage or applying for discounts once competition returns.
4. Stay Informed
Follow updates from the Department of Insurance and local news outlets. Policy conditions and market participation are changing rapidly.
The Bottom Line: A Transitional Year
State Farm’s decision to non-renew 72,000 policies is a symptom of a deeper, systemic imbalance — one that will take time and policy reform to fix.
The coming year will be a transitional period for California’s insurance market. As new modeling rules and regulatory reforms roll out, experts anticipate that more insurers will eventually return — but homeowners should brace for continued turbulence in the meantime.
“Don’t wait for your policy to expire,” ABC10 warned. “If you’ve got new coverage, take it. Even if you overlap for a couple of months — just have it. Because finding coverage right now is the hardest it’s ever been.”
For California homeowners, that advice couldn’t be more relevant. In an unpredictable insurance landscape, stability — even temporary — is something worth holding onto.
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