Recently news broke that State Farm, the largest property insurer in California, plans to non-renew 72,000 home and apartment policies by this summer. Some ZIP codes have up to 70% of policies being non-renewed, with notifications going out over the next few months. Click here to see if your ZIP code is impacted. Your State Farm agent should be able to confirm if your policy is on the list for non-renewal. Other insurers might follow suit.

This follows news in January that the Department of Insurance approved rate increases of 20% on average for State Farm policies in the state. Many of the largest insurers had previously stopped writing any new homeowner’s policies in the state.

These events reflect the challenges insurers face in managing profitable business considering the rising costs due to climate change-related natural disasters and rapidly rising rebuilding costs. California’s insurance market is highly regulated and insurance companies must get approval from the Department of Insurance (DOI) to raise premiums by more than a small amount. This has put insurers grappling with rising costs in a bind and many of them have opted to play hard ball with the DOI.

For Californians who have been denied or dropped from their homeowner’s insurance coverage, there are a few options available:

  1. Admitted Carriers
    The best place to obtain insurance is from a standard admitted carrier (e.g., State Farm, Allstate, AAA, USAA, Farmers) because they are regulated by the Department of Insurance (DOI), and the DOI must approve significant rate increases. Sadly, the list of admitted carriers writing new policies in California is currently minimal.
  2. Non-Admitted Carriers
    If you can’t obtain insurance from an admitted carrier, then you might be able to obtain insurance from a non-admitted carrier. These carriers are less regulated than admitted carriers and have more freedom in pricing. Here is a list of non-admitted carriers: https://www.insurance.ca.gov/01-consumers/120-company/07-lasli/
  3. California FAIR Plan (Fair Access to Insurance Requirements
    For homeowners who can’t find a better option, the CA FAIR Plan offers basic fire protection without liability or theft coverage and costs more than a traditional policy. If possible, it’s a good idea to add a supplemental policy for the items excluded by the FAIR Plan.

While there is nothing that can be done if you’re on an insurer’s non-renewal list, to avoid being placed on such a list in the future, several actions can be taken.

  1. Read Your Mail
    The best place to obtain insurance is from a standard admitted carrier (e.g., State Farm, Allstate, AAA, USAA, Farmers) because they are regulated by the Department of Insurance (DOI), and the DOI must approve significant rate increases. Sadly, the list of admitted carriers writing new policies in California is currently minimal.
  2. Take Preventative Action
    If residing in an area prone to wildfires or other hazards, take preventive measures for risk mitigation and document these steps to prove to your insurer you’ve reduced risk.
  3. Don’t Rock the Boat
    Consider increasing the homeowners’ deductible and avoiding making small claims that can be handled out of pocket.

In summary, the California property insurance market is facing a crisis due to the increasing frequency of extreme weather events and rising construction costs. Major insurance carriers have ceased issuing new policies, are seeking approval for big premium increases and are non-renewing unprofitable policies. While it might take years to reach equilibrium in the state’s insurance market, it would appear that in the long run, everyone will be paying more for property insurance.