California’s largest home insurer is back — but not in the way many homeowners hoped. In a headline-making move, State Farm announced it will renew some previously canceled homeowner policies after dropping tens of thousands earlier this year.
At first glance, it sounds like progress in a state still mired in an insurance crisis. But as FOX KTVU reported, there’s a major catch: the renewed policies will not include fire coverage. Insurance analyst Karl Susman joined FOX to explain why this partial return is only a small step toward solving a much larger problem.
A Glimmer of Hope for Some Homeowners
In Orinda, a tree-lined East Bay community surrounded by oak-covered hills, residents like Annie Bolen have been living with the fallout of California’s insurance pullbacks for nearly a year.
After her Farmers Insurance policy was canceled, Bolen struggled to rebuild complete coverage. Today, she carries:
- Fire coverage through the California FAIR Plan
- Supplemental private coverage for theft, water damage, and liability
Her premiums have nearly quadrupled, even as her overall protection has declined.
“What used to be affordable and complete is now expensive and fragmented,” Bolen said.
State Farm’s announcement has brought cautious optimism to homeowners in similar situations — but only with significant limitations.
What State Farm Is Actually Offering
State Farm will begin renewing a limited number of existing policies for homes that meet strict safety and risk criteria. However, those renewed policies will exclude wildfire coverage — the defining risk in California’s market.
“They won’t do fire,” Susman explained. “Well, that’s the major risk.”
For affected homeowners, this means pairing a new State Farm policy with a separate FAIR Plan fire policy, effectively splitting coverage into two pieces. While that may restore partial protection, it also adds complexity and cost.
“It’s a sliver of policy,” Susman said. “Helpful for some people, but it doesn’t change the actual crisis in California.”
How the California FAIR Plan Fits In
The California FAIR Plan was created in 1968 to guarantee basic fire coverage for properties that cannot secure insurance in the private market. It is a shared risk pool funded by all admitted insurers operating in the state.
FAIR Plan coverage is limited. It generally covers:
- Fire and lightning
- Internal explosion
It does not cover theft, water damage, or personal liability. To obtain full homeowners protection, policyholders must buy an additional “wraparound” policy from a private insurer.
“Now what they’re going to be able to do,” Susman said, “is purchase the California FAIR Plan either directly or through an appointed agent.”
With hundreds of thousands of Californians now relying on it, the FAIR Plan has become a stopgap — not a long-term solution.
Why State Farm’s Move Still Matters
Even with its restrictions, State Farm’s announcement carries symbolic weight. It marks the first major sign that a large insurer is willing to re-engage with California’s market, even in a limited way.
“This is a step in the right direction,” Susman said. “But it doesn’t change what’s happening to people who still can’t find insurance at all.”
The move suggests that insurers may be watching the state’s regulatory reforms closely and reassessing their willingness to operate under new rules.
Wildfire Risk: The Core of California’s Insurance Crisis
At the heart of California’s insurance breakdown is wildfire.
Over the past decade, fires have destroyed tens of thousands of homes and cost insurers billions in claims. The catastrophic 2017 and 2018 fire seasons erased more than two decades of underwriting profit in just two years.
Faced with:
- Rising wildfire losses
- Restrictions on how risk can be priced
- Soaring reinsurance costs
Insurers began pulling back aggressively. Today, most major carriers have paused or sharply limited new homeowners business in high-risk regions.
The result is a fractured market:
- Urban homeowners pay sharply higher premiums
- Rural and foothill homeowners struggle to find any coverage
- FAIR Plan enrollment has surged to record levels
“We’re now in a place where companies are protecting themselves,” Susman said, “and consumers are left piecing together their own protection.”
Regulatory Reform and the Slow Thaw
California’s insurance rules under Proposition 103 were designed to prevent price gouging, but they have not kept pace with modern wildfire risk. Insurers cannot fully use forward-looking catastrophe models or adequately factor in reinsurance costs.
That’s where Insurance Commissioner Ricardo Lara’s Sustainable Insurance Strategy comes into play. The plan is designed to:
- Allow more accurate pricing using catastrophe models
- Reward homeowners who harden their homes against wildfire
- Require insurers to write policies in higher-risk zones in exchange for regulatory flexibility
State Farm’s limited return may be an early signal that these reforms are beginning to restore some confidence.
“We’re not out of the woods,” Susman warned, “but it’s movement. And movement is what this market needs.”
The Human Toll of Partial Coverage
For homeowners like Bolen, piecemeal insurance feels like a fragile compromise. Her premiums are higher, her coverage is divided between multiple policies, and her long-term stability feels uncertain.
“I want to go back to having one insurer for a fair price that provides the coverage I need,” she said. “That doesn’t seem like too much to ask.”
Her experience reflects what’s truly at stake. Insurance isn’t just a contract — it’s the foundation of homeownership, rebuilding, and financial security. When coverage fractures, so does confidence in the housing market itself.
Why Non-Fire Coverage Still Sends a Signal
On the surface, a homeowners policy without fire coverage may seem of limited value. But in market terms, it sends an important signal.
By cautiously re-entering, even with restrictions, State Farm is indicating conditional confidence in California’s regulatory direction. Given that the company insures nearly one in five homes statewide, even partial engagement influences the broader market.
“It shows there’s willingness,” Susman said. “That’s the first step toward rebuilding a functioning marketplace.”
What Homeowners Should Do Right Now
While regulatory changes continue to evolve, Susman urges homeowners to stay proactive:
- Work with an independent broker who can access multiple carriers and specialty markets
- Document all home-hardening and wildfire mitigation efforts
- Pair FAIR Plan fire coverage with a wraparound policy for full protection
- Avoid small, discretionary claims that can trigger non-renewals
- Stay informed on regulatory reforms expected into 2025
“Right now,” Susman said, “knowledge is power. The more you understand your options, the better you can protect yourself.”
Final Thoughts: A Step Forward, Not a Solution
State Farm’s partial return signals movement in a market that has been frozen for years — but it is not a cure for California’s insurance crisis.
Until insurers can sustainably offer full wildfire-inclusive coverage, the system remains fundamentally broken. For those who qualify, keeping partial coverage may feel like progress. For everyone else, it’s simply another reminder of how fragile the market still is.
State Farm’s move is a first test of California’s new regulatory direction — not the finish line.
As Susman cautioned, the real solution will come only when insurers can once again fully insure California homes without risking financial collapse.
