State Farm, California's largest homeowner's insurance provider, has indicated where it will not be renewing policies, and some Bay Area residents are affected, according to a document provided by the California Department of Insurance.
According to the document, State Farm will not be renewing 1,703 policies in Orinda's 94563 ZIP code, which represents 55% of the city's homeowner policies. That is the highest number of nonrenewals for one ZIP code in the state. The next highest is in Los Angeles.
State Farm, California's largest homeowner's insurance provider, has indicated where it will not be renewing policies, and some Bay Area residents are affected, according to a report from the San Francisco Chronicle. Bob Redell reports.
Other Bay Area ZIP codes affected, according to the document, are 94549 in Contra Costa County, 95033 in Santa Clara and Santa Cruz counties, and 95404 and 95409 in Sonoma County. (Read the full State Farm document at the end of this article.)
In Orinda, some 1,700 policies will be dropped, which is more than any other zip code in the state.
"They are not being a good neighbor," Orinda Mayor Darlene Gee said.
Gee has written a letter to the governor, insurance commissioner, and state lawmakers asking them to take action because impacted residents are having a tough time finding affordable insurance elsewhere.
"This decision was not made lightly, and only after careful analysis of State Farm's financial health, which continues to be impacted by inflation, catastrophe exposure, reinsurance costs and the limitations of working within decades-old insurance regulations," the statement read.
Homeowners who live in areas at high risk of catastrophes like wildfires will have to buy into the California FAIR plan subsidized by the state. It’s expensive and offers only fire coverage.
Last month, a nonprofit research group said insurers have been losing money due to California premium limits and that for every $1 insurance companies receive in premiums in the state, a $1.08 is spent on paying out claims, primarily due to wildfires.
The Insurance Information Institute says the California Department of Insurance is updating regulations that could bring more policy options at competitive prices back to the state.
"To allow insurers to better manage risk, that would mean being able to charge what is commonly known as actuarially-sound rates – something that is not occurring today," said Mark Friedlander of the Insurance Information Institute.
Friedlander says it could take a few years for the California homeowner's insurance industry to stabilize even after the new laws are enacted.
New documents show where State Farm will not be reviewing its policies across California. Raj Mathai speaks with Consumer Investigator Chris Chmura to learn how homeowners should respond if they learn they are among this group.
In one zip code, 95033, in the Santa Cruz mountains, more than 65% of policies will be ending. And in 95409 near Santa Rosa, nearly 48 percent. But in the entire state, the area with the most policies being non-renewed is the small Contra Costa County city of Orinda.
Last month, State Farm, the Illinois-based company and California's largest insurer, cited soaring costs and the increasing risk of natural disasters — like wildfires and outdated regulations — as reasons it won't renew the policies of thousands of homes.
State Farm, the nation's biggest home insurance company, will no longer sell home insurance in California and Allstate and Farmers have made similar moves. Risks associated with climate change are creating a home insurance crisis in California, but homeowners still have options.
Rather, there are several key reasons. California's state insurance regulations, inflation, increased wildfires and heightened reinsurance costs have all contributed to the current California home insurance crisis.
Last year, State Farm reported a loss ratio of 89.61% in California — meaning it paid $89.61 in claims for every $100 it took in in premiums. It was the company's worst performing year since the devastating wildfires of 2017.
Much of the reason centered on the increasing risk of wildfires in the state. Now according to a statement from the insurer's California spokesman, Sevag Sarkissian, it will renew those policies — but with a hitch.
State Farm, which stopped offering new homeowner policies in the state last May, cited issues related to inflation, natural disasters, reinsurance rates and “the limitation of working within decades-old insurance regulations.”
State Farm won't renew 72,000 California home insurance policies this year. State Farm plans to cancel tens of thousands of homeowners' insurance policies in California this year. The cancellation plan will affect 30,000 homes and 42,000 apartments and starts to take effect in early July.
“This decision was not made lightly and only after careful analysis of State Farm General's financial health, which continues to be impacted by inflation, catastrophe exposure, reinsurance costs, and the limitations of working within decades-old insurance regulations,” the company said in its news release.
According to the 2021 California Property & Casualty Market Share Report, losses incurred by insurance companies more than tripled to over $15 billion in 2017 from slightly more than $4 billion in 2016 (California Department of Insurance, 2022). In 2018, losses remained high at $13 billion.
When will the change take effect? Starting in July 2024, State Farm will stop insuring more than 30,000 residential homes in California, and starting in August, will discontinue coverage on 42,000 commercial apartment properties.
ZIP codes with the most non-renewed policies are in parts of Contra Costa, Los Angeles, Santa Clara, Santa Cruz, Sonoma, San Diego and Nevada counties. Search a map below that shows areas where policies won't be renewed. State Farm put out a list of tens of thousands of policies that won't be renewed.
However, Travelers has the best rates, while AAA, USAA and Chubb are among California's top home insurance companies for other reasons. Ratings include satisfaction scores from J.D. Power's 2023 U.S. Home Insurance Study and 2023 complaint data from the National Association of Insurance Commissioners (NAIC).
State Farm said it is working with the California regulators “to establish an environment in which insurance rates are better aligned with risk.” Last year, the company said it would not issue any new policies in California, citing construction costs that were outpacing inflation and “rapidly growing catastrophe ...
Two more insurers are pulling out of California's troubled homeowners insurance market, straining a marketplace that already has seen the pullback of several other companies that have cited increase costs related to wildfire risks. Tokio Marine America Insurance Co.and Trans Pacific Insurance Co.
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