Insurer State Farm has announced its intention to discontinue 72 000 home insurance policies in California. Effective as of summer 2024, this decision concerns 2% of the policies underwritten by the company in the State, and raises concerns about access to home insurance for Californians.
State Farm has justified its decision by the soaring costs of fire and wildfire claims, as well as outdated regulations that, according to the company, require it to reduce its risk exposure to maintain solvency. This announcement came just as California's elected insurance commissioner was working to reform regulations to give insurers more flexibility to adjust premiums and limit risk.
For its part, the California Department of Insurance said that State Farm will have to answer questions from regulators about its decision to cancel its policyholders' contracts.
The company had already stopped underwriting new home insurance policies in California [4] as early as March 2023. Combined with the upcoming termination of 72 000 existing policies, this decision sheds light on the growing challenges facing insurers and policyholders due to climate risks.