California’s Homeowners Insurance Crisis: State Farm’s Pullback and the Impact on Los Angeles

Published Date: 04/10/2024

California’s homeowners insurance crisis continues to expand — and now the impact is being felt squarely in Los Angeles. In early April 2024, NBC4 Los Angeles reported that State Farm, the state’s largest property insurer, will not renew more than 70,000 home and apartment insurance policies across California.

The non-renewals, which begin taking effect this summer, are concentrated in the highest wildfire-risk ZIP codes — including some of the most iconic and expensive neighborhoods in Southern California: Pacific Palisades, Brentwood, Calabasas, Hidden Hills, and Woodland Hills.



For thousands of homeowners in these hillside communities, the announcement marks a new chapter in California’s long-running struggle to balance climate risk, consumer protection, and insurance solvency.

The Breaking News: 70,000+ Policies Dropped in High-Risk Areas

As NBC4’s Alex Rozier reported from Brentwood, the latest data reveals which neighborhoods are most affected by State Farm’s unprecedented pullback.

“The list of non-renewals really focuses in on the neighborhoods that seem to be highest risk for wildfires or other natural disasters,” Rozier said. “And this news has left thousands of California families scrambling for new insurance.”

In Los Angeles County alone, neighborhoods like Pacific Palisades, Brentwood, Woodland Hills, and Calabasas top the list. Further north, State Farm is pulling out of parts of Sonoma, Santa Rosa, and Orinda, while other high-risk zones statewide — from the Santa Cruz Mountains to the foothills near Mount Diablo — are seeing similar impacts.

State Farm said the decision “was not made lightly,” citing:

• Inflation, which has driven up the cost of repairs;
• Catastrophe exposure, especially from wildfires and floods;
• Rising reinsurance costs, which have tripled in some cases; and
• Limitations from decades-old regulations, particularly California’s Proposition 103, which prevents the use of forward-looking risk models.

“This decision was not made lightly,” the company said. “It comes only after careful analysis of State Farm General’s financial health, which continues to be impacted by inflation, catastrophe exposure, reinsurance costs, and the limitations of working within decades-old insurance regulations.”

Homeowners Caught Off Guard: A Sudden Shift

Many homeowners were blindsided by the announcement.

Brentwood resident Peggy Garrity, who spoke with NBC4, said she feels fortunate to have escaped the cut — but horrified for her neighbors who didn’t.

“I’m thankful I don’t have one of the 72,000 home or apartment policies not renewed,” she said. “But I’m horrified for everybody else.”

Others voiced frustration that the decision came so suddenly, with little warning or recourse.

“After the recent fires, floods, and now big rains,” one resident said, “it was only a matter of time before they started denying claims — and now they’re just getting out of the market to keep the money they already got.”

From “Shopping” to “Hunting” for Insurance

Insurance expert Karl Susman of Susman Insurance Agency — a frequent voice in the state’s ongoing coverage crisis — told NBC4 that the market has fundamentally changed.

“The most important lesson to take away right now is don’t wait,” Susman said. “Because we have such huge numbers of people looking for policies, and the capacity from the few carriers that are still taking a little bit of business here or there is so small that it’s just eaten up right away.”

In fact, Susman says the process of finding insurance is no longer “shopping” — it’s “hunting.”

“We used to call it shopping for insurance. Now we call it hunting,” he said. “You know, you ready, aim, fire. If you get something, take it — because that’s the best you can do.”

That analogy captures the desperation many homeowners now face: a market where availability disappears as quickly as it appears, leaving brokers scrambling to secure even minimal coverage for clients before it’s gone.

Prices Skyrocket as Competition Collapses

With State Farm’s exit — and American National’s complete withdrawal from California just weeks earlier — homeowners can expect sharp premium increases.

“People should expect to pay a lot more right now because there is no competition,” Susman said. “This is the antithesis of competition — and when that happens, prices go up.”

The problem isn’t just cost — it’s access. Even homeowners willing to pay high premiums are finding few, if any, private carriers willing to write new business in their ZIP codes.

For those who can’t find private coverage, the California FAIR Plan, the state’s “insurer of last resort,” has become the only option.

But FAIR Plan policies cover only fire and smoke damage — nothing else. To get full protection, homeowners must purchase an additional “Difference in Conditions” (DIC) policy for water damage, theft, and liability — often doubling their costs.

The Regulatory Backdrop: Proposition 103 and a Changing Climate

California’s insurance regulation has long been among the most consumer-friendly in the nation — but increasingly, experts warn that the system, enacted in 1988, no longer fits the climate realities of 2024.

Under Proposition 103, insurers must base rates on historical losses rather than predictive catastrophe modeling.

That means carriers can’t factor in modern data on vegetation density, wind patterns, or wildfire fuel loads — even though those elements now define California’s risk landscape.

“We’re using models from a world that no longer exists,” one industry analyst noted.

The result is a system where insurers can’t charge enough to cover future losses — leading them to simply withdraw rather than operate at a guaranteed loss.

The Domino Effect: How Carrier Withdrawals Impact Everyone

When a major insurer like State Farm pulls back, it doesn’t just affect their customers. It ripples through the entire market.

Here’s why:

• When private carriers leave, demand for FAIR Plan coverage skyrockets.
• The FAIR Plan’s losses are shared by all insurers doing business in California.
• Those costs get passed back to consumers through higher premiums statewide.

The end result is a system where fewer companies bear greater risk, forcing everyone — even those in low-risk areas — to shoulder the cost of California’s climate exposure.

A Market at a Crossroads: The Sustainable Insurance Strategy

Insurance Commissioner Ricardo Lara has acknowledged the crisis and is rolling out a reform package known as the Sustainable Insurance Strategy, which aims to:

• Allow forward-looking catastrophe modeling in rate-setting,
• Permit reinsurance costs to be included in rate filings, and
• Accelerate regulatory approvals to keep pace with inflation and risk.

Industry experts, including Susman, believe these reforms could stabilize the market within the next 12 to 18 months — but warn that short-term pain is unavoidable.

“We’re going to have to go through this transition,” Susman said in a recent interview. “Once the reforms take hold, carriers will come back. But right now, the market is going to get tighter before it gets better.”

What Homeowners Should Do Now: Navigating the Crisis

For Californians facing non-renewal notices, experts recommend a proactive approach.

✅ Start Early
Don’t wait for your policy to expire. Contact your agent as soon as you receive notice — or even before — to begin exploring alternatives.

✅ Work with an Independent Broker
Captive agents can only sell for one company (like State Farm or Allstate). Independent brokers have access to multiple carriers, including surplus-line markets and specialty programs.

✅ Consider the FAIR Plan
If no private coverage is available, apply through the FAIR Plan and add a DIC policy to fill gaps.

✅ Harden Your Home
Defensible space, fire-resistant roofing, ember-proof vents, and cleared vegetation can improve insurability — and may qualify you for future discounts.

✅ Stay Informed
Check the California Department of Insurance (insurance.ca.gov) for the latest updates and consumer guidance.

The Bigger Picture: California as a Climate Laboratory

California’s insurance crisis isn’t just a local story — it’s a preview of what climate volatility could mean for property markets nationwide.

From Florida’s hurricanes to Colorado’s wildfires, insurers across the U.S. are confronting similar pressures: rising reinsurance costs, aging infrastructure, and the inability to price risk accurately under legacy regulations.

As Susman noted in previous interviews, 45 out of 50 states are now facing some form of property insurance disruption.

“We’re just the first to experience it at this level,” he said. “But we’ll also be the first to figure it out.”

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

State Farm’s non-renewals in Los Angeles are more than a corporate adjustment — they’re a signal of a system stretched to its limits.

From Pacific Palisades to Calabasas, homeowners are discovering that living close to nature now comes with an uninsurable price tag.

But if there’s a silver lining, it’s that this crisis is finally forcing the change California has postponed for decades.

As NBC4’s Alex Rozier put it:

“It’s a tough time in the areas that may need insurance the most.”

The coming months will determine whether California’s reform efforts can restore balance — or whether the state’s insurance map will keep shrinking until even the most careful homeowners are left without options.