San Diego Insurance Crisis: State Farm Exits 50 ZIP Codes

Published Date: 04/11/2024

California’s homeowners insurance crisis has reached San Diego County. According to CBS 8 (KFMB), State Farm, the state’s largest insurer, will discontinue homeowner coverage in 50 ZIP codes across the region beginning this summer.



The move is part of a broader statewide withdrawal that will leave more than 30,000 homeowners without coverage. State Farm cites inflation, regulatory barriers, and rising catastrophe risk as the primary drivers.

For many San Diego residents, this is more than a statewide headline — it’s a financial shock. Communities such as Rancho Santa Fe, Jamul, Tierra Santa, Lakeside, El Cajon, and Mission Valley are among the hardest hit, with replacement premiums reaching staggering levels.

“It’s definitely a difficult time right now,” said Karl Susman, insurance industry expert and principal at Susman Insurance Agency. “It’s about as bad as it’s ever been in my 30-plus years doing this.”

State Farm’s Non-Renewals: 30,000 Policies and 50 ZIP Codes

State Farm recently filed data with the California Department of Insurance identifying the ZIP codes targeted for non-renewal. Across San Diego County, those areas include:

• Rancho Santa Fe (92067, 92091): The hardest hit, with roughly half of all State Farm policies being dropped.
• Jamul and Lakeside (91935, 92040): Brush-heavy, mountainous regions with elevated wildfire exposure.
• Tierra Santa and Mission Valley (92124, 92108): Densely populated neighborhoods exposed to both fire and flood risk.
• El Cajon (92019, 92021): Inland zones where heat and wind amplify loss potential.

In total, 50 ZIP codes in the county will see widespread non-renewals as part of State Farm’s broader 30,000-policy reduction statewide. Non-renewal notices have already begun arriving in mailboxes.

“I had a client reach out, and he’s getting a cancellation in July,” said Matthew Clark, a broker with C3 Insurance in San Diego. “His premium with State Farm was around $12,000 — and his new premium is going to be $40,000. Overnight.”

Sticker Shock in High-Risk Areas

That Rancho Santa Fe client’s experience reflects a broader trend across San Diego’s high-risk ZIP codes.

“They’re used to paying a normalized premium for the area,” Clark said. “But now they’re looking at almost four times that.”

Premium increases of 50% to 300% are becoming common, particularly in brush zones and canyon-adjacent communities. In many cases, homeowners are also facing tighter coverage limits and higher deductibles.

As a result, homeowners are being forced into difficult choices:

• Downsizing coverage to manage costs
• Moving to FAIR Plan policies with limited protection
• Or, in some cases, going uninsured while hoping for future reform

For one of California’s most expensive housing markets, this shift presents a stark new reality.

Why Insurers Are Pulling Back from San Diego

As CBS 8’s Shannon Handy reported, the causes of the pullback are well known within the industry.

“With what’s happened in our insurance market, these carriers are just not profitable in California,” Clark explained.

Key drivers include:

• Inflation: Rebuilding costs for lumber, labor, and supplies remain 35% to 40% higher than pre-2020 levels.
• Reinsurance Costs: Global reinsurance pricing for California wildfire exposure has surged, in some cases tripling.
• Regulatory Lag: Proposition 103 requires insurers to rely on historical loss data instead of predictive catastrophe modeling.
• Catastrophe Exposure: Wildfires, floods, and landslides are occurring more frequently and with greater severity.

Faced with these pressures, insurers are choosing to aggressively reduce exposure rather than risk operating at a sustained loss.

The Domino Effect of Carrier Withdrawals

State Farm’s decision follows closely behind American National’s complete exit from California, which affected another 36,000 policies statewide.

With Allstate and Farmers also limiting new business, the private insurance market is rapidly contracting. Smaller regional carriers and the California FAIR Plan are becoming the only remaining options for many homeowners.

This shifting demand is pushing premiums higher even for customers who are not directly non-renewed.

“Even customers who are not getting dropped are still being impacted,” Handy reported.

As demand concentrates among fewer insurers, those remaining carriers raise premiums to manage their higher risk exposure.

Expert Guidance: Why Homeowners Must Act Quickly

Karl Susman stresses that receiving a non-renewal notice does not mean coverage ends immediately — but time is limited.

“If you’re getting a non-renewal letter from State Farm today, it doesn’t mean your coverage ends tomorrow,” he said. “It means you’ll be non-renewed at your next renewal date.”

However, the shrinking market means waiting can be costly.

“Start looking for replacement coverage now,” Susman advised. “Replacement coverage is very hard to come by. If you find something you can get right now, don’t wait — take it.”

Homeowners can temporarily carry overlapping policies and cancel old coverage later if needed. If no private option is available, the FAIR Plan remains an immediate fallback.

The FAIR Plan: A Limited Safety Net

The California FAIR Plan is available to homeowners who cannot find private market coverage, but it provides only fire and smoke protection.

It does not cover:

• Theft or vandalism
• Water damage
• Personal liability

To obtain full protection, homeowners must purchase a Difference in Conditions (DIC) policy, typically from a surplus-line carrier such as Lloyd’s of London.

For high-value properties in locations like Rancho Santa Fe and Jamul, combined FAIR Plan and DIC premiums can exceed $30,000 to $50,000 per year.

Because FAIR Plan losses are shared across all insurers in California, a major wildfire could also threaten the program’s financial stability.

A System Under Extreme Strain

California’s insurance system is now under pressure on every front:

• Private carriers are shrinking or exiting the market
• The FAIR Plan is overwhelmed with record demand
• Regulators are racing to update outdated frameworks

The entire system is one severe wildfire season away from potentially destabilizing losses.

“It’s about as bad as it’s ever been in my 30-plus years doing this,” Susman said.

The Path Forward: California’s Sustainable Insurance Strategy

Despite the difficult short-term outlook, there is cautious optimism surrounding the state’s new Sustainable Insurance Strategy, led by Insurance Commissioner Ricardo Lara.

The reform plan seeks to modernize how insurers price and manage risk by:

• Allowing forward-looking catastrophe modeling
• Including reinsurance costs in rate filings
• Accelerating rate approval timelines

Industry experts believe these reforms could entice major insurers to expand again within the next 12 to 18 months if fully implemented.

What San Diego Homeowners Should Do Now

Experts recommend immediate action for homeowners in affected ZIP codes:

✅ Contact Your Agent Immediately
Confirm whether your policy is on the non-renewal list.

✅ Start Shopping Early
Explore regional carriers, surplus-line markets, and specialty programs as soon as possible.

✅ Understand Your Coverage
If using the FAIR Plan, add a DIC policy and verify that rebuilding limits reflect current construction costs.

✅ Mitigate Fire Risk
Create defensible space, clear vegetation, and install fire-resistant materials. Mitigation may improve insurability.

✅ Stay Informed
Monitor updates from the California Department of Insurance and local agencies.

Climate Risk Meets Regulation in California

San Diego’s experience mirrors what is unfolding across the state — and, increasingly, across the nation.

From California wildfires to Florida hurricanes and Texas hailstorms, insurers are struggling to adapt to accelerating climate volatility while operating under legacy regulatory systems.

“This isn’t just about one company or one county,” Susman warned. “It’s about how we adapt an entire system to a new reality.”

The Bottom Line

State Farm’s withdrawal from 50 San Diego ZIP codes marks a significant escalation in California’s insurance crisis.

For homeowners, it brings higher costs, fewer choices, and an urgent need to act. For policymakers, it underscores the necessity of accelerating long-delayed reforms. And for the industry, it is a stark lesson in the collision between climate risk and outdated regulation.

“It’s going to take time to fix,” Susman said. “But with the right reforms, we can stabilize the market. Until then, every homeowner needs to be proactive — because the market is changing faster than anyone expected.”