State Farm Insurance will drop coverage for 72,000 California homes and condos this summer. California’s largest insurer, which is based in Illinois, cited a spike in costs, the increasing risk of forest fires and other disasters, and outdated regulations for its refusal to renew policies on 30,000 houses and 42,000 apartments, according to CBS News.
“State Farm General takes seriously our responsibility to maintain adequate capacity to pay claims for our customers and to comply with applicable financial solvency laws,” the company said. “It’s necessary to take these actions now.” California’s insurance commissioner has launched a year-long review of home insurance regulations aimed at reassuring the collapsing market of the state giving insurers more freedom to raise premiums while extracting commitments from them to extend coverage in fire risk areas. The California Department of Insurance said State Farm will have to answer questions from regulators about the decision.

MyMotherlode reported that State Farm said it will work with Gov. Gavin Newsom and Insurance Commissioner Ricardo Lara to develop reforms that better align insurance rates with risk.
many California homeowners are just now finding their policies canceled — and hundreds of thousands more left with an expensive option of last resort — and for them, Commissioner Lara’s efforts to fix the market can’t come soon enough.Lara introduced two basic rules to be followed. The first, introduced last month, will streamline rate reviews. State law gives the Insurance Department the power to approve or deny insurers’ requests for premium increases. Insurers complain that the process is holding back requested increases caused by the growing risks of climate change and inflation.
The second regulation would allow insurers to use catastrophe modeling — which combines historical data with projected risk and losses — along with other factors when setting their premiums. California is the last state to allow the modeling of this crash.
“We are undertaking the largest insurance reform in the state,” Lara said earlier this month. “We can no longer look solely to the past to guide us to the future.”
This new round of cancellations represents just 2 percent of State Farm’s policies in the state, and the company did not say which regions were hit hardest or its criteria for choosing not to renew.
Last August, we reported that several major insurance companies had stopped accepting California homeowners for new policies due to rising wildfire risks. As the number of wildfires in the state increases and other factors escalate, insurance companies worry about the risk — and the cost.
Residents in high-risk areas for wildfires or hurricane regions need homeowners insurance — and lenders require it. No insurance, no home loan. More people are moving to the interface, which is costing insurance companies too much to repair and replace homes while battling inflation, said Janet Ruiz of the Insurance Information Institute. Two insurance giants have pulled out of California’s home insurance market, explaining that the rising risk of wildfires and skyrocketing construction costs led to their decisions to stop writing new policies in the state. “We take seriously our responsibility to manage risk,” State Farm said. “It is necessary to take these actions now to improve the company’s financial strength.”