State Farm Drops Home Insurance for Thousands of Californians in High-End Neighborhoods
Thousands of Californians in upscale Westside neighbourhoods in Los Angeles County are set to lose their home insurance coverage this summer as State Farm, the largest home insurance provider in California, announced it would not be renewing 72,000 property policies across the state.
The move by State Farm affects some of the country’s toniest neighbourhoods, including Bel-Air, Pacific Palisades, and Woodland Hills, adding another layer of expense and financial risk for homeowners in areas already imperilled by wildfires. Older homeowners and those with lower incomes who bought their homes when prices were lower could be hit hard by the loss of coverage.
Denise Hardin, president of State Farm, explained the decision in a letter to Insurance Commissioner Ricardo Lara, citing recent rate hikes approved by the Department of Insurance amid high inflation as insufficient to restore the company’s financial strength. The company stated that reducing exposure was necessary to align with available capital and avoid a financial failure that could impact the entire market.
In neighbourhoods like Pacific Palisades, Brentwood, Woodland Hills, and Bel-Air, a significant percentage of State Farm’s policyholders will not have their coverage renewed this summer. The insurer also looked at communities prone to wildfires and those at risk of fires following an earthquake, including Beverly Hills and Westwood.
Thelma Waxman, president of the Brentwood Homeowners Association, expressed concern over the loss of coverage, stating that it has been a stressful time for residents living near high-risk fire zones. The association had previously formed a California Fire Safety Council to address fire risks in the area, partly in response to insurance companies dropping policyholders in the state.
State Assemblywoman Jacqui Irwin (D-Thousand Oaks) expressed concern over the situation and hoped that regulatory changes could encourage insurers to continue writing policies for Californians. Insurance companies have cited high inflation, catastrophe exposure, reinsurance costs, and outdated regulations as reasons for scaling back policies in the state.
As a last resort, some Californians have turned to the FAIR Plan, which provides limited coverage for property owners unable to find affordable conventional policies. However, the surge in enrollment is straining the state insurer, putting it at risk of insolvency in the event of a catastrophic event.
Insurance Commissioner Ricardo Lara has proposed new rules to address the home insurance crisis, aiming to move people off the FAIR Plan and slow the increase in premiums. State Farm has committed to collaborating with the state to find a resolution to the crisis and achieve necessary reforms. Residents affected by the loss of coverage are urged to start shopping for new policies as soon as possible, as finding insurers willing to write policies in the state may be challenging.