(Airdate: 2024-06-07) CBS - KFMB - State Farm To Continue Insuring Some Non-renewed Homeowners
Published Date: 06/07/2024
State Farm’s Limited Return: What It Means for California Homeowners Facing Non-Renewals
For months, California homeowners have faced a grim reality: major insurers pulling back from the state’s market, skyrocketing premiums, and limited access to coverage in wildfire-prone regions.
But there’s finally a glimmer of good news.
As CBS 8 (KFMB) reported, State Farm — which previously announced it would non-renew approximately 30,000 homeowners policies across California — now says that some affected customers may be able to keep coverage through a companion policy paired with the California FAIR Plan.
Insurance expert Karl Susman joined CBS 8’s David Gotfredson to explain what this means for homeowners, how “DIC” policies work, and why this partial return from State Farm could signal the beginning of a broader insurance market recovery.
What’s Happening: A Partial Reinstatement, Not a Full Return
Earlier this year, State Farm made national headlines when it announced it would not renew tens of thousands of California homeowners policies, citing rising wildfire losses, higher reinsurance costs, and regulatory delays that prevented timely rate adjustments.
Now, in an effort to maintain some level of support for its customers, the company has introduced a “companion” policy option — officially called a Difference in Conditions (DIC) policy.
“The DIC policy is a homeowners policy excluding the peril of fire,” Gotfredson explained in the segment. “It covers everything except fire damage.”
In practice, that means homeowners will still need fire coverage through the California FAIR Plan — the state’s insurer of last resort. The State Farm DIC policy then covers all the other risks, such as:
- Water damage
- Theft and vandalism
- Liability protection
- Wind and storm damage
Together, the FAIR Plan and DIC policy form a two-part solution that mimics the coverage of a traditional homeowners policy — though typically at a higher cost.
Why DIC Policies Exist — and Why They Matter Now
DIC (Difference in Conditions) policies aren’t new. They’ve long existed as a way for homeowners in high-risk areas to maintain comprehensive protection when standard insurance isn’t available.
When a major insurer refuses to write full coverage in a wildfire zone, homeowners can combine:
- A FAIR Plan fire policy (which only covers fire and smoke damage), and
- A DIC policy (which covers nearly everything else).
“State Farm has always offered what’s called a DIC policy,” Susman explained. “It’s the companion policy that goes on top of the California FAIR Plan.”
Until recently, these companion policies were used mostly in rural areas or regions hit repeatedly by wildfires. But now, even suburban homeowners — people miles from major fire zones — are being pushed into this two-policy setup.
Why This Move by State Farm Matters
The return of DIC offerings to non-renewed State Farm customers marks an important symbolic and practical shift.
Symbolically, it shows that major insurers aren’t completely abandoning California. They’re finding ways to stay involved while managing their wildfire exposure.
Practically, it gives homeowners a safer, more stable alternative to lesser-known or financially weaker insurers that have filled the void.
“Many State Farm customers have been turning to lesser-known companies like Bamboo Insurance,” Gotfredson noted.
While Bamboo and similar companies have helped fill gaps, State Farm’s re-entry with its DIC option may bring more predictability and potentially lower premiums.
“Dollar for dollar,” Susman said, “if you’re looking at a DIC policy with Bamboo versus a DIC policy with State Farm, it’s a safe bet that the State Farm DIC is going to be less expensive.”
The Tradeoff: Higher Costs and Less Simplicity
For homeowners, the biggest downside of this setup is cost.
Pairing a FAIR Plan policy with a DIC policy typically results in higher overall premiums than a single, comprehensive policy from a standard carrier.
“Homeowners are still likely to pay more,” Gotfredson reported. “Rates are going to be higher in California for property insurance than they were five years ago.”
Susman agreed, adding that the state’s current crisis is the “antithesis of competition.”
“Where we are right now is higher than it needs to be,” he said. “That’s because this is basically the antithesis of zero competition.”
The hope, however, is that new reforms (discussed below) will encourage more carriers to re-enter the market, restoring competitive pricing.
The Bigger Picture: Why State Farm and Other Insurers Pulled Back
The recent retreat by major insurers like State Farm, Allstate, and Farmers didn’t happen in a vacuum. It’s the result of years of mounting losses and regulatory friction.
1. Wildfire Costs Have Exploded
California’s wildfires are burning hotter, faster, and longer than ever before. The state has seen over $30 billion in insured losses since 2017.
2. Reinsurance Has Become Unaffordable
Insurers buy “insurance for insurance companies” — known as reinsurance — to protect themselves from catastrophic loss. Global reinsurance costs have more than doubled since 2020, making it harder for carriers to operate profitably in high-risk regions.
3. Regulatory Delays Under Proposition 103
California’s Proposition 103, passed in 1988, requires the state’s Department of Insurance to approve any rate changes. While designed to protect consumers, the process has become so slow that insurers can’t adjust fast enough to keep up with rising risks and costs.
“It’s not that companies don’t want to insure here,” Susman has said in prior interviews. “It’s that they can’t do it sustainably under the current system.”
Reform Is Coming: A Modernized Framework
The good news? Change is finally on the way.
Insurance Commissioner Ricardo Lara and Governor Gavin Newsom have both advanced reforms designed to stabilize California’s market under what’s called the Sustainable Insurance Strategy.
The plan includes:
- Allowing forward-looking wildfire models to assess risk (rather than relying only on past data).
- Permitting insurers to factor in reinsurance costs when setting rates.
- Incentivizing home hardening and fire mitigation.
- Streamlining the rate approval process under Prop 103.
“When new insurance reform laws go into effect by the end of the year,” Susman said, “insurance companies will start to come back to California.”
He predicts that once competition returns, prices will naturally moderate.
“When we do have a free market again and we have hundreds of companies writing,” he added, “just by competition, we’ll see rates go down.”
What This Means for State Farm Customers
If you’re one of the 30,000 homeowners affected by State Farm’s non-renewal, this development could mean several things:
- You may be eligible for a DIC policy if you qualify for coverage through the California FAIR Plan.
- You’ll still need two policies — one from FAIR (for fire) and one from State Farm (for everything else).
- Your total premium will likely increase, though the State Farm DIC option may be cheaper than alternatives.
- Coverage continuity improves — you can keep your relationship with State Farm while maintaining comprehensive protection.
Susman offered a realistic — but hopeful — forecast for the near future:
“If they’re purchasing a DIC policy with State Farm today,” he said, “before that policy renews in a year, the likelihood is better than not that State Farm will have returned to writing full homeowners policies.”
What Homeowners Should Do Now
For homeowners navigating this shifting landscape, here are Susman’s key recommendations:
1. Contact Your Agent Immediately
Ask whether you qualify for a State Farm DIC companion policy. Your agent can determine eligibility and help coordinate FAIR Plan coverage.
2. Compare All Options
Independent brokers can access multiple carriers — including surplus and specialty lines — to help find competitive alternatives.
3. Document Fire Mitigation Efforts
Home-hardening steps like clearing vegetation, upgrading roofs, and installing ember-resistant vents can improve insurability.
4. Stay Informed About Reform Updates
Watch for the rollout of California’s new insurance regulations later this year, which could bring more choices and stability.
5. Avoid Gaps in Coverage
Even a brief lapse can have major consequences, especially if you carry a mortgage. Always secure replacement coverage before your policy expires.
A Sign of Change — and Cautious Optimism
For years, California’s insurance market has been defined by retreat: fewer insurers, higher costs, and growing uncertainty.
State Farm’s reintroduction of companion DIC policies doesn’t solve the problem overnight — but it’s a tangible sign that conditions may be improving.
“This is not the full solution,” Susman cautioned. “But it’s progress.”
If Governor Newsom’s and Commissioner Lara’s reforms take effect as planned, homeowners could start to see more insurers returning — and more balanced pricing — as early as next year.
For now, the message is clear: coverage options are expanding again, even if slowly.
And for Californians who’ve been living on the insurance edge, that’s good news worth celebrating.
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