The Hartford to withdraw from Calif. homeowners insurance market

California lawmakers’ attempts to stop insurance companies from bailing out of the homeowners market are failing as another major insurer announced it would cease writing new policies beginning Feb. 1.

The Hartford Financial Services Group announced its pullback this month, saying it would stop selling new home, property, condo, and dwelling fire insurance, citing the state’s “unique challenges,” which include the high risks of elevated wildfires and California’s regulations that restrict how companies can price their policies.

Move follows other exits

Hartford’s move follows similar actions by State Farm, Allstate, Farmers Insurance and USAA, which have also halted writing new business.

The Hartford’s move won’t render a fatal blow to the state’s market. Although the California Dept. of Insurance lists The Hartford as the 15th largest active insurer in the state, the company holds less than 1% of the overall California homeowners insurance market, according to the S&P Capital IQ.

But The Hartford’s move will likely reignite the market crisis in the state and once again signal that California elected officials and regulators are still a ways off from resolving the issue, which has made fire insurance difficult to find and expensive to buy.

Last month, the state’s largest private insurer, State Farm, was granted auto and home insurance rate hikes of more than 20% for current customers, affecting more than five million policyholders.

But it didn’t do enough to bring State Farm back into the fold of selling new fire insurance policies. Even customers of California’s FAIR plan, the state funded insurer of last resort, have seen their rates rise, some by as much as 150% in the last six years.

Commissioner ordered to address crisis

In Sept., Gov. Gavin Newsom signed an executive order calling on Insurance Commissioner Lara to address issues the crisis and expand coverage options for consumers.  Three main components of the order would allow insurers to consider future climate risks when calculating rates, something that has been prohibited. It also would allow for reinsurance costs to be included in the rate change calculations that can be passed on to consumers. In return for those concessions, the department would require carriers to cover homeowners in wildfire-prone parts of the state at 85% of their statewide coverage. For example, if a company provides 10% of the homeowner policies across California, they would be required to provide 8.5% of the coverage in “at-risk” areas.

But those provisions haven’t taken hold and haven’t lured insurers back to the market, many of which are clamoring for more premium hikes as a solution to their problems.

The Hartford in a statement said the California insurance “environment” caused it to reconsider the viability of writing new homeowners’ business in the state.

“We do not enter into this decision lightly, and we appreciate and support efforts like Commissioner [Ricardo] Lara’s Sustainability Insurance Strategy to help bring stability to the market,” the company said. “We will be watching those efforts closely.”

The company said it would continue to write all its other existing products in California, such as business insurance and personal auto, and will continue to renew existing homeowners' business consistent with its underwriting guidelines.

Efforts to reach the California Dept. Of Insurance for comment were not successful.
 

Doug Bailey is a journalist and freelance writer who lives outside of Boston. He can be reached at [email protected].

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Doug Bailey is a journalist and freelance writer who lives outside of Boston. He can be reached at [email protected].