Major California property insurer decides to not renew tens of thousands of policies [The Sacramento Bee]

Sacramento Bee (CA)

State Farm plans to not renew roughly 72,000 property and commercial apartment policies in California starting this summer, the company announced Wednesday.

About 30,000 of the affected policies will be for homeowner, rental, residential community association and business owner insurance. The other approximately 42,000 will be for commercial apartment policies.

That will make up a little more than 2% of the company’s footprint in the state, the announcement said. It was California’s largest property insurer in 2022 — the most recent data available — according to the Department of Insurance.

The decision follows the company’s announcement in May that it would stop accepting new applications for property and business policies. At the time, State Farm cited higher construction costs, a growing risk from catastrophic events, such as wildfires, and challenges related to how it insures its own business.

In Wednesday’s announcement, the company referenced those same challenges as well as “the limitations of working within decades-old insurance regulations.”

Insurance Commissioner Ricardo Lara has announced regulatory changes that his department is rolling out this year.

Michael Soller, a department spokesman, said in an emailed statement Thursday the agency was confident the actions “will improve conditions for the overall market.”

He said the company’s decision “raises serious questions about its financial situation — questions the company must answer to regulators.”

The action was taken by State Farm General Insurance Company, which sells homeowners insurance in California. The company acknowledged the department’s proposed changes and vowed to continue to work with the agency to “establish an environment in which insurance rates are better aligned with risk.”

In December, the department approved a 20% average rate hike for the company’s homeowner insurance policies.

On Wednesday, the insurer said it will begin taking action in July on the homeowners policies and in August for the commercial ones and that it would occur on a rolling basis over the next year. It also said it would notify people affected by the decision before their coverage expires.