(Airdate: 2024-03-22) CW - KTLA - State Farm discontinuing 72,000 home policies in California

Published Date: 03/22/2024

State Farm’s Latest Exit: What 72,000 Policy Non-Renewals Reveal About California’s Deepening Insurance Crisis

California’s fragile homeowners insurance market has been dealt another major blow. On March 22, 2024, KTLA 5 News reported that State Farm — the state’s largest property insurer — will not renew approximately 72,000 home and apartment insurance policies across California this summer.

The decision comes less than a year after the company halted all new homeowner and business property policies in the state. It’s the latest and perhaps most dramatic sign that California’s property insurance system is under historic strain — one where climate risk, rising costs, and outdated regulation have combined to create a near-collapse in availability and affordability.

Let’s unpack what this decision means for consumers, how it connects to broader market reform efforts, and what affected homeowners can do right now.

1. The Announcement: 72,000 Policies Cut Across California

According to KTLA’s report, State Farm will begin the non-renewal process on a rolling basis starting in July for home policies and August for apartment policies.

This move affects:

• 30,000 homeowners and rental dwelling policies, and
• 42,000 commercial apartment building policies.

In total, that’s 72,000 non-renewals — representing about 2% of State Farm’s total policy count in California.

While the percentage may appear small, the impact is enormous, particularly in high-risk wildfire zones where replacement coverage is scarce or unaffordable.

“Experts say those who will be dropped are almost certain to be properties considered a high risk for wildfires and other catastrophes,” KTLA reported.

In other words, these aren’t random cancellations. They’re targeted withdrawals from regions where insurers have suffered the greatest losses — often the same areas still rebuilding from recent wildfires.

2. State Farm’s Explanation: Rising Risk, Rising Costs, and Outdated Rules

In a statement, State Farm blamed a combination of factors:

• Rising costs of construction, labor, and materials
• Increased frequency and severity of catastrophes such as wildfires and floods
• An outdated regulatory framework that prevents insurers from pricing risk accurately

“State Farm is blaming rising costs and increased risk of catastrophe in California and outdated regulations for some of the reasons why it’s not renewing those California policies,” KTLA’s Omar Lewis reported live from Hollywood.

The company says the move is necessary to “ensure long-term sustainability.”

Behind that phrase lies a harsh truth: insurers are paying out far more in claims than they’re allowed to collect in premiums under California’s current rules.

3. A Decade of Disasters: Why California Became “Uninsurable”

To understand this crisis, it helps to look at California’s recent history of catastrophic events.

“Fourteen of the state’s twenty most destructive wildfires on record all happened in the last ten years,” Lewis noted.

These fires — from Paradise (2018) to Santa Rosa (2017) to Lahaina-adjacent events that underscored shared vulnerabilities — have caused billions in insured losses. At the same time, climate patterns have shifted, extending wildfire season and introducing new threats like atmospheric river flooding.

Insurers base rates on historical losses, but in California, history is no longer a reliable predictor. The result: a system where companies can’t charge enough to cover future risks — and therefore, choose to leave.

4. The Larger Trend: Insurers Retreating from High-Risk States

State Farm’s decision isn’t isolated. Over the past two years, several major insurers have scaled back or paused coverage in California, Florida, Colorado, and Louisiana — all states hit by climate-driven disasters and regulatory friction.

In California:

• Allstate stopped writing new homeowner policies in 2022.
• Farmers has capped new business.
• USAA, Nationwide, and Liberty Mutual have limited exposure in wildfire zones.

The pattern is clear: the traditional insurance model is breaking under the weight of escalating climate risk.

5. Regulatory Pressure: Proposition 103 and the Push for Reform

At the core of this issue is Proposition 103, a 1988 voter-approved law that gives California regulators strong oversight of insurance rates. It requires insurers to justify rate increases based solely on historical data — effectively preventing the use of modern tools like catastrophe modeling to project future risk.

But as KTLA noted, that’s starting to change.

“This also comes as the state’s elected insurance commissioner begins a year-long overhaul of home insurance regulation, which hopes to calm California’s volatile insurance market.”

That overhaul is part of Commissioner Ricardo Lara’s Sustainable Insurance Strategy, which includes:

• Allowing insurers to use forward-looking catastrophe models
• Permitting adjustments for reinsurance costs (the insurance that insurers buy for themselves)
• Expediting rate review processes to keep up with market conditions

If successful, these reforms could encourage carriers to reenter the market — though most analysts expect a 12–18 month lag before real relief is felt.

6. Who’s Most at Risk?

State Farm hasn’t disclosed the specific locations or criteria it used to select the 72,000 policies for non-renewal. But experts, including broker Karl Susman, suggest the cuts are almost certainly focused on:

• Wildland-urban interface zones (WUI) — where development meets brushland
• Rural and foothill areas with limited fire protection infrastructure
• Properties with prior claims or inadequate defensible space

“State Farm has what are called captive agents,” Susman explained on KTLA. “That means those agents can only write with State Farm.”

This is significant because homeowners working with captive agents — who represent only one carrier — may struggle to find replacement coverage quickly. Independent brokers, by contrast, can shop multiple insurers, including specialty and surplus lines carriers.

7. What Homeowners Should Do Now

If you’re one of the 72,000 policyholders receiving a non-renewal notice, time is critical.

KTLA’s report offered several practical steps:

✅ Start shopping immediately

Even though you’ll receive at least 60 days’ notice, finding a new policy can take weeks. Underwriters are inundated, and capacity is limited.

✅ Don’t wait until your policy expires

“If you do find a new policy that checks all the boxes, take it immediately,” experts told KTLA. “Do not wait until the State Farm policy expires, even if there’s an overlap.”

Maintaining continuous coverage is crucial — even if it means paying for double coverage temporarily.

✅ Contact the California Department of Insurance

The CDI can connect you to approved brokers and provide information about the California FAIR Plan, which offers basic fire insurance for hard-to-insure homes.

• Phone: 1-800-927-4357
• Website: insurance.ca.gov

✅ Consider the FAIR Plan — but know its limits

The FAIR Plan provides limited fire coverage only. Most homeowners need a “Difference in Conditions” (DIC) wrap-around policy for water damage, theft, and liability protection.

8. The Economic Ripple: Higher Housing Costs

State officials are also warning that this new round of non-renewals could further drive up housing costs.

“Officials are concerned that this will create rising home costs for those impacted California residents, many of whom are still recovering from wildfires over the years,” KTLA reported.

When insurance becomes scarce or unaffordable, mortgage lenders may require expensive alternative coverage, or buyers may be priced out entirely. That has knock-on effects for real estate markets, local economies, and disaster recovery funding.

9. The Silver Lining: Reform Momentum

Despite the grim short-term outlook, there are reasons for cautious optimism.

California’s insurance crisis has finally reached a tipping point — prompting meaningful regulatory reform that had been stalled for decades.

If Commissioner Lara’s modernization plan succeeds, insurers will soon be able to:

• Use modern risk models to set fairer rates,
• Reflect reinsurance costs transparently, and
• Compete for business again in high-risk zones.

As broker Karl Susman said in earlier interviews, once carriers can price risk more accurately, competition will increase — and premiums will eventually come down.

10. The Bottom Line: A Market in Transition

State Farm’s decision to drop 72,000 policies is another chapter in California’s ongoing insurance crisis — a crisis defined by climate change, inflation, and an outdated regulatory framework.

But it’s also a wake-up call — one that has finally forced the state to modernize how insurance is regulated and priced.

For now, homeowners should:

• Stay informed,
• Maintain active coverage, and
• Work with trusted brokers to navigate this turbulent transition period.

As KTLA’s Omar Lewis put it:

“Start shopping for a new policy immediately... because it’s very difficult, if not impossible, to get certain types of coverage right now.”

That may sound daunting — but with reform on the horizon, it may also be the last phase of California’s long insurance drought before stability finally returns.