Consumer Alert on State Farm's Decision

Helping Consumers Understand State Farm’s Announcement to Temporarily Pause New Policies

Current customers to keep insurance, private passenger auto not affected

May 30, 2023 — On Friday, May 26th, State Farm General Insurance Company announced it will temporarily stop writing new homeowners’ and certain commercial insurance policies in California. Announcements such as State Farm’s can create uncertainty and anxiety among consumers looking for homeowners insurance. While the California Department of Insurance cannot legally control a company’s business decision, we can help Californians navigate their options.

The Facts

• The factors driving State Farm’s decision are beyond our control – climate change challenges, higher reinsurance costs affecting the entire insurance industry, and global inflation.
• Current customers will not lose their insurance. There are no non-renewals taking place with this announcement and State Farm continues to write new private passenger auto insurance policies.
• There are approximately 115 insurance companies continuing to write residential policies throughout the state -- which includes the WUI -- depending on the particular features of the home, the home’s wildfire risk score, and the community in which it resides. This business decision is specific to State Farm.
• The FAIR Plan is available insurance of last resort and is able to offer up to $3 million coverage for homeowners and, later this year, will offer up to $20 million commercial insurance coverage for businesses, homeowners associations, condominium complexes, and others.

The California Department of Insurance is focused on what we can control – the safety of our homes and communities. We have been here before after major wildfires. What’s different is the actions that we’re taking – the first-ever insurance discount program for wildfire safety and unprecedented wildfire mitigation investments from the State Legislature and Governor.

The Department of Insurance has several tools to help consumers shop for insurance, including Tips for Finding Residential Insurance and an Insurance Finder tool that can help you locate an agent who can help you in your area. The experts at the Department of Insurance can help consumers with insurance coverage or claim questions. Contact us at our consumer hotline at (800) 927-4357 or online chat at

www.insurance.ca.gov.

Insurance Commissioner’s Actions

Insurance Commissioner Ricardo Lara is addressing both short and long-term factors to create lasting solutions for consumers, including:

• Safer from Wildfire Regulations: Commissioner Lara has mandated insurance companies to recognize and reward wildfire safety and mitigation efforts made by homeowners and businesses. His new regulation requires insurance companies to submit new rates that recognize the benefit of safety measures such as upgraded roofs and windows, defensible space, and memberships in community-wide programs such as Firewise USA and the Fire Risk Reduction Community designation developed by the state’s Board of Forestry and Fire Protection. It further requires insurance companies to provide discounts to consumers that meet various elements of the Safer from Wildfires framework and to provide consumers with their property’s “wildfire risk score,” including a right for consumers to appeal that score.
• Proactive Outreach to Insurance Companies: Commissioner Lara continues to proactively outreach to insurance companies to write more business in California so consumers continue to have available coverage options in the face of continued climate change. These discussions are on-going.
• Rate Filing Approvals and Market Conduct Reviews: Our Department experts closely scrutinize insurers’ submitted rate filings to ensure any approved rates are justified and to make sure consumers are not paying more than necessary for their coverage. These reviews promote fairness, transparency, and accountability within the insurance marketplace. Department rate filing approval times for non-intervened filings averaged just over six months between 2015 and 2022.
• FAIR Plan Reforms: Commissioner Lara is reforming the FAIR Plan to expand its coverage options and ensure affordability for policyholders, including expanding residential and commercial coverage limits for the first time in 25 years to keep pace with increased costs. His agreement with the FAIR Plan increases its commercial coverage limit to $20 million for businesses unable to find coverage in the normal insurance marketplace.
• Moratorium on Non-renewals and Cancellations: Under a law written by then-Senator Lara, the Commissioner has protected more than 4 million people statewide since 2019 through mandatory one-year moratoriums on insurance companies cancelling or non-renewing residential insurance policies in certain areas within or adjacent to a fire perimeter after a declared state of emergency is issued by the Governor.
• Sponsoring New Insurance Protections : Commissioner Lara-sponsored bills signed into law by the Governor -- despite opposition from insurance companies -- will mean larger payouts for some consumer claims, less red tape from insurance companies, and more help for people under evacuation orders.
• Funding for Wildfire Safety: We are working with the Governor and Legislature to increase our wildfire mitigation efforts, pumping $2.7 billion into wildfire resilience programs over the past three years. These efforts include funding fire prevention grants for local risk reduction projects, creating fire breaks that protect communities, expanding defensible space inspections, and increasing strategies like prescribed fire and fuels reduction projects.
• Additional Tools: Commissioner Lara is committed to continue to look at how we could give insurance companies more tools to better manage risk given the continued threat of climate change so we can maintain competition and ensure stability in the insurance marketplace while protecting consumers. However, there must be a firm, mandatory commitment from the voluntary insurance market to provide and maintain homeowners and commercial insurance, especially to our most vulnerable and those living in the WUI, transparency in the Proposition 103 ratemaking process, and consistent reliability and accuracy that take into account community-based and parcel-level risk reduction and mitigation strategies and home hardening efforts

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