California Insurance Crisis: State Farm’s Policy Non-Renewals and the Growing Strain on the Market

Published Date: 04/09/2024

The slow-motion unraveling of California’s homeowners insurance market continued this April, as CBS KCAL News reported that State Farm—the state’s largest property insurer—is non-renewing tens of thousands of policies in some of Southern California’s most vulnerable hillside neighborhoods.

The cuts, concentrated in Pacific Palisades, Brentwood, Bel Air, Tarzana, and Calabasas, represent the most localized data yet from State Farm’s broader announcement in March that it would drop approximately 72,000 home and apartment policies statewide.

For many homeowners in these high-risk zones, the news means skyrocketing premiums, limited coverage options, and growing uncertainty about how long their homes will remain insurable at all.

State Farm’s Non-Renewals: Thousands of Policies Affected in Southern California

In a live report from Pacific Palisades, KCAL’s Tina Patel confirmed that State Farm’s decision will hit some of Southern California’s most scenic—and most fire-prone—zip codes hardest.

“A lot of people here in the Palisades are going to be shopping around for new insurance because there are so many homes nestled against the hillsides,” Patel said. “State Farm has decided there’s a high risk and it’s not worth it for them to cover homeowners.”

According to information filed with the California Department of Insurance (CDI):

• Pacific Palisades: Over 1,600 policies will not be renewed — nearly 70% of State Farm’s customers in the area.
• Brentwood: More than 1,300 policies are being dropped — roughly 60% of the neighborhood’s total.
• Calabasas: Over 1,000 homeowners will lose their coverage.
• Tarzana and Bel Air: More than half of all State Farm policies will be affected.

That’s an extraordinary level of contraction for one company in one region — and a clear signal of how deeply wildfire and climate risk now shape insurance availability in California.

Why State Farm Is Pulling Back: The Financial and Environmental Drivers

The reasons behind the decision are both economic and environmental.

“Right now, State Farm is the largest insurer in the state,” Patel explained, “but they say costs have gone up in California because of outdated regulations, but also because of the increased risk of catastrophic events like wildfires and mudslides.”

For State Farm and other insurers, the financial math has simply stopped working.

Key Drivers Behind the Non-Renewals:

• Rising Reinsurance Costs: The global reinsurance market—the insurance companies buy to protect themselves—has seen record rate increases.
• Inflation: Post-pandemic price spikes have driven up the cost of rebuilding materials and labor.
• Catastrophic Risk: Frequent, severe wildfires have made traditional pricing models unreliable.
• Regulatory Lag: California’s Proposition 103 still requires insurers to use historical data when setting rates, even though past losses no longer predict future threats.

In short: insurers are paying more in claims than they’re allowed to collect in premiums — and they’re responding by reducing exposure.

California’s Insurance Market in Retreat: A Broader Crisis

State Farm’s move comes just weeks after American National announced it would withdraw from the state entirely, affecting 36,000 more homeowners. And last year, both Allstate and Farmers quietly paused new business in many high-risk regions.

In total, over 100 insurers have scaled back or left California in the past few years.

For homeowners, that has translated into an almost unrecognizable marketplace — one where coverage that once cost $2,000 a year might now cost $10,000 or more, if it’s even available.

“They picked areas that they’ve either seen brush fires in the past or they’re anticipating there being substantial fires in the future,” one independent insurance broker told KCAL News. That focus on wildfire probability explains why hillside and canyon neighborhoods — often prized for their views — are now ground zero in California’s insurance crisis.

The Human Impact: The Challenges Homeowners Face

While regulators and insurers debate policy reform, homeowners are left to navigate an impossible situation.

“Homeowners who are affected should have already gotten notices that they’re not being renewed,” Patel said. “Even though most of those won’t go into effect until the summer, they should start shopping around to get new policies.”

But that’s easier said than done. The market is so tight that policies can vanish overnight.

Many families are turning to the California FAIR Plan, the state’s “insurer of last resort.” But it comes with serious drawbacks.

FAIR Plan policies only cover fire and smoke damage — nothing else. There’s no coverage for water damage, theft, or personal liability. To get full protection, homeowners must purchase a “Difference in Conditions” (DIC) wraparound policy — often doubling their total cost.

“It is going to be really hard and really expensive for a lot of people throughout our state,” Patel concluded.

The Geography of Risk: Hyper-Localized Underwriting

The KCAL data highlights how insurers are now pricing and underwriting at a neighborhood-by-neighborhood level.

Using modern mapping technology, carriers can evaluate everything from vegetation density and slope angle to distance from the nearest fire station.

That means even homes just a few streets apart can face dramatically different outcomes.

For example, a house near the base of a canyon might still be insurable, while one tucked into a hillside a half-mile away could be deemed too risky.

This hyper-localized underwriting is reshaping the California real estate market, too — with buyers increasingly asking about insurability before making offers.

Is This a Temporary Crisis or a Permanent Shift in California’s Insurance Landscape?

Industry experts like Karl Susman have warned for years that the market was heading for a “tipping point.” With the state’s two largest carriers — State Farm and Allstate — both in retreat, that tipping point may now have arrived.

The question is whether regulatory reform can bring them back.

The California Department of Insurance is currently rolling out its Sustainable Insurance Strategy, a sweeping reform package that will:

• Allow insurers to use forward-looking catastrophe modeling
• Permit pricing based on reinsurance costs
• Speed up rate approval timelines to reflect real-world losses

If implemented successfully, these changes could entice major carriers to re-enter the market within 12 to 18 months.

“The one bright spot,” Patel reported, “is that the California Department of Insurance is in the process of overhauling regulations. So long term, there should be more competition in the state and hopefully lower prices.”

What Homeowners Should Do Right Now

If you live in one of the affected zip codes — or anywhere in a high wildfire-risk area — now is the time to act.

✅ Step 1: Confirm Your Status
Contact your State Farm agent directly. Don’t assume you’re safe just because you haven’t received a notice yet.

✅ Step 2: Start Shopping Immediately
Replacement coverage takes time. Independent brokers can access smaller regional carriers or surplus-line markets that specialize in high-risk properties.

✅ Step 3: Review FAIR Plan Options Carefully
If no private coverage is available, the FAIR Plan can fill the gap. Just remember that you’ll likely need a DIC policy for full coverage.

✅ Step 4: Fire-Harden Your Home
Invest in mitigation: clear defensible space, upgrade to fire-resistant roofing and vents, and install ember-resistant features. Some insurers may reward these improvements with discounts or reentry eligibility.

✅ Step 5: Stay Informed
Monitor updates from the California Department of Insurance at insurance.ca.gov.

Rebuilding the System: A Work in Progress

California’s insurance system is being rebuilt in real time. The Sustainable Insurance Strategy represents the state’s first serious attempt to modernize a framework designed in the 1980s — before today’s megafires, inflation, and billion-dollar reinsurance losses.

But reform takes time. In the meantime, hundreds of thousands of Californians are living in limbo.



“This isn’t just about fires,” one industry analyst noted. “It’s about affordability, accessibility, and the fundamental question of how to insure a state that’s on the front lines of climate change.”

The Bottom Line: A Turning Point for California’s Insurance Market

State Farm’s withdrawal from communities like Pacific Palisades, Brentwood, and Calabasas isn’t an isolated event — it’s part of a statewide realignment of risk and regulation.

In the short term, it means fewer options and higher premiums.

In the long term, it may force the kind of modernization that California’s insurance market has needed for decades.

As KCAL’s Tina Patel concluded:

“There’s hope that reform will eventually lead to more competition and lower prices. But for now, it’s going to be really hard and really expensive.”

For homeowners in the canyons and hillsides of Southern California, that sums up the challenge ahead — finding stability in an insurance market still learning how to live with fire.