(Airdate: 2024-04-10) CBS - KPIX - Bay Area zip codes top list where State Farm to end home policies

Published Date: 04/10/2024

State Farm’s Wildfire Exit: Bay Area Communities Hit Hard as Non-Renewals Begin

The insurance crisis in California continues to deepen. This April, CBS KPIX San Francisco reported that State Farm, the state’s largest home insurer, is non-renewing more than 30,000 homeowner policies statewide, with some of the hardest-hit communities located right in the Bay Area’s hillsides and foothills.

For homeowners in Contra Costa, Sonoma, and Santa Cruz counties, the move is more than a business decision — it’s a turning point in California’s growing struggle to maintain an insurable housing market amid escalating wildfire risk.

“The changes are coming faster than the very fire everyone’s worried about,” noted KPIX reporter John Ramos.

1. Diablo’s “Rude Awakening”

Ramos began his report in Diablo, a small township near Danville at the base of Mount Diablo — an area known for its scenic oak-covered hills and multimillion-dollar homes.

“This quiet neighborhood at the foot of Mount Diablo is one of many that is about to get a rude awakening about the state of homeowners insurance in California,” Ramos said.

When homeowner Ron Agazzarian purchased his property, he assumed his existing State Farm policy would simply transfer. Instead, he was told the company wouldn’t insure his new home because it was located in a high wildfire-risk zone.

“We thought we would just roll over our policy,” Agazzarian said. “They told us they wouldn’t insure out here.”

His experience is emblematic of a broader shift: insurers are drawing new red lines around regions once considered safely suburban, now reclassified as fire-prone due to changing climate conditions.

2. Where the Cuts Are Happening

According to data filed with the California Department of Insurance, State Farm’s latest round of non-renewals includes:

• Diablo (94528): Over 50% of the 152 policies will not be renewed.
• Santa Cruz Mountains: More than 65% of policies in some ZIP codes will end.
• Santa Rosa area: Nearly 48% of local policies will be dropped.
• Orinda (Contra Costa County): The hardest-hit city — 1,700 out of 3,100 policies (about 55%) will not be renewed.

Across the state, more than 30,000 policies will be affected when the first wave of notices goes out beginning July 3, 2024.

For homeowners in these areas, that date now looms like a second fire season — one that burns through coverage instead of forests.

3. The Why: “They Were Writing Where No One Else Would”

Insurance expert Karl Susman explained to KPIX that the scale of State Farm’s pullback reflects years of overexposure in areas other insurers had already deemed too risky.

“For some reason, State Farm kept writing,” Susman said. “They were not just writing, but they were writing in areas that most carriers would not have written in ever.”

In hindsight, Susman said, this made State Farm’s retreat inevitable.

“When State Farm’s coming out now being the first one to actually start non-renewing homes in what are considered above average for fire risk, it doesn’t surprise us too much.”

The issue, he explained, isn’t just risk — it’s pricing accuracy.

State Farm, like all California insurers, operates under the constraints of Proposition 103, the state’s 1988 law that requires all rate changes to be approved by regulators and based on past loss data, not predictive models.

That’s a problem when yesterday’s climate no longer resembles today’s.

4. A Crisis Fueled by Climate

California’s wildfire seasons are growing hotter, longer, and more destructive. In the last decade alone, 14 of the state’s 20 most destructive wildfires on record have occurred.

For insurers, the frequency and severity of these events have shattered the traditional risk models used to set rates.

Rising global reinsurance costs — the insurance companies buy to protect themselves — have compounded the problem, squeezing margins even further.

As a result, carriers are reducing exposure in high-risk ZIP codes, even when those areas are home to long-term customers with clean claims histories.

“And the refrain is, ‘I’ve never had a claim. I’ve been with them 20, 30 years,’” said Tom Stack, a real estate agent in Orinda. “People are insulted, disgusted, upset.”

5. The FAIR Plan: The Last Resort, Not a Solution

For those losing coverage, the only fallback is the California FAIR Plan, the state’s “insurer of last resort.”

But as Susman warned, the FAIR Plan is straining under record demand.

“The program has become so overwhelmed with applicants that it can now take weeks just to get a quote,” he told KPIX.

And that’s only the beginning of the problem.

The FAIR Plan offers fire-only coverage — no liability, theft, or water damage. To achieve full protection, homeowners must purchase a Difference in Conditions (DIC) policy from a private carrier — if they can find one.

Even then, costs are soaring.

“If they’re too large for the California FAIR Plan,” Susman said, “they’re going to have to talk with a broker to try and get a policy through Lloyd’s of London. We could be looking at premiums, without exaggerating, of $30,000, $40,000, $50,000 a year.”

He called it “outrageous — but exactly what you expect to see when there’s no competition.”

6. The Domino Effect: Real Estate and Regional Economics

The insurance pullback is rippling far beyond the underwriting world.

Realtors like Stack say homebuyers are now required to secure insurance before closing deals — and in some cases, even before making offers.

That’s a dramatic shift from just a few years ago, when insurance was an afterthought in the homebuying process.

Now, in areas like Orinda, Santa Rosa, and the Santa Cruz Mountains, insurance availability can make or break a sale.

“Finding home insurance has become so erratic that I’m advising people to look for coverage before they start house hunting,” Stack told KPIX.

This insurance uncertainty is contributing to a slowdown in regional housing markets — especially in the high-end sectors of Contra Costa, Marin, and Sonoma counties, where properties are more likely to sit on fire-exposed terrain.

7. A System at Risk of Insolvency

The California FAIR Plan Association, which pools risk from all admitted insurers, is also nearing a breaking point.

Operators warn that a single catastrophic wildfire could push the program toward insolvency, forcing participating insurers to absorb billions in losses — costs that would ultimately be passed back to consumers.

“When I say they have very few choices, I’m being kind,” Susman said. “Some may literally have no choices.”

That grim assessment highlights just how thin California’s insurance safety net has become.

8. A Glimmer of Hope: Regulatory Reform on the Horizon

Despite the dire short-term outlook, there is cautious optimism for long-term change.

The California Department of Insurance, led by Commissioner Ricardo Lara, is working to modernize the system through the Sustainable Insurance Strategy — a sweeping reform plan that will:

• Allow insurers to use forward-looking catastrophe modeling;
• Permit the inclusion of reinsurance costs in rate filings; and
• Enable pricing on a home-by-home basis rather than broad ZIP-code groupings.

“The state is looking to change regulations that would allow insurers to price policies on a home-by-home basis,” KPIX reported. “Susman says that should attract insurers back to the market again, allowing them to assess risk on more factors than just a ZIP code.”

If successful, these reforms could help restore competition, stabilize pricing, and gradually reduce FAIR Plan dependency.

But implementation will take time — likely into 2025 — leaving homeowners to navigate another difficult year in the meantime.

9. What Homeowners Can Do Now

For homeowners facing non-renewal or struggling to find coverage:

✅ Contact Your Insurer or Broker Immediately

Don’t wait for your policy to expire. Begin exploring alternatives as soon as you receive notice.

✅ Explore the FAIR Plan

It’s expensive and limited but may be your only short-term option. Pair it with a DIC policy for broader coverage.

✅ Fire-Harden Your Home

Create defensible space, upgrade to ember-resistant vents, and install Class A roofing. Document improvements — they can help you qualify for coverage or lower premiums when private carriers re-enter the market.

✅ Work with Experienced Brokers

Independent brokers can access surplus-line markets (such as Lloyd’s) and help tailor layered coverage solutions.

10. The Bottom Line

State Farm’s non-renewals in Orinda, Diablo, Santa Cruz, and other Bay Area communities mark another turning point in California’s insurance crisis.

It’s a crisis driven by climate, regulation, and economics — but also one that’s forcing long-overdue modernization.

“There could be hope in the future,” Susman said. “The new regulations should attract insurers back to the market.”

Until that future arrives, homeowners are left navigating a volatile landscape where coverage is scarce, premiums are soaring, and the only certainty is change.