State Farm says no to any more insurance policies in California. Why?

A firefighter walks near a flaming house in Santa Rosa, Calif., in this 2017 file photo. The largest property and casualty insurance company in the U.S. has said no to new customers in California.

A firefighter walks near a flaming house in Santa Rosa, Calif., in this 2017 file photo. The largest property and casualty insurance company in the U.S. has said no to new customers in California. (Jeff Chiu, Associated Press)


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SALT LAKE CITY — The largest property and casualty insurance company in the United States just closed the door on new customers in California hoping to build or buy a home, citing extreme wildfire risks in that state and dramatic increases in construction costs.

State Farm is the largest insurer operating in California and its ban on new policies spreads beyond just homes in risky wildfire zones, but everywhere.

In a statement on the company's website, it said the decision also affects businesses but does not impact auto insurance. Existing homeowners with State Farm policies are also not affected.

"We take seriously our responsibility to manage risk. We recognize the governor's administration, legislators, and the California Department of Insurance (CDI) for their wildfire loss mitigation efforts. We pledge to work constructively with the CDI and policymakers to help build market capacity in California," it said. "However, it's necessary to take these actions now to improve the company's financial strength."

California in flames: According to Cal Fire statistics, it lists the Camp Fire from 2018 that killed 85 people and destroyed 18,804 structures as one of the top 20 most destructive wildfires. Other fires include the North Complex fire in 2020 that killed 15 people and razed 2,352 structures. As of May 30, the agency has battled 1,205 wildland fires in 2023.

The New York Times reports that the insurance company's decision has been a slow-rolling result of California's notorious history with cataclysmic wildfires.

"Insurance rates in California jumped after wildfires became more devastating than anyone had anticipated. A series of fires that broke out in 2017, many ignited by sparks from failing utility equipment, exploded in size with the effects of climate change. Some homeowners lost their insurance entirely because insurers refused to cover homes in vulnerable areas," the Times reported.

New reality of climate change: After Hurricane Andrew devastated Miami in 1992, the losses bankrupted some insurers and caused most national carriers to pull out of the state, according to the Times.

In an article in NewsNation, it notes insurance companies nationwide have said whether it's a tornado, hurricane or fire, they know how much stress is on homeowners. More studies are showing that not only are these major weather events happening more but are also more severe, and for that reason, more people are living in harm's way.

"Not only do you have an increased frequency and severity of disasters, but you also have to look at it from the insurers' perspective," said Michael Barry, chief communications officer at the Insurance Information Institute. "They're operating in, like the rest of the economy, a high inflation environment."

In May, the National Oceanic and Atmospheric Administration, along with the National Science Foundation, announced their intent to create a research center in response to the insurance industry's climate needs.

"This partnership between NSF and NOAA focuses on industry and academia jointly solving some of the most difficult problems we face. Predicting the risks and damages of climate-related perils such as wildfires, floods, tornados and hurricanes in a world of radically changing and intensifying catastrophic weather is essential," said the foundation's assistant director for geosciences Alexandra Isern. "Using the NSF industry-university cooperative research center model, this powerful vehicle will channel basic and use-inspired research for the benefit of the U.S. economy."

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Amy Joi O'Donoghue
Amy Joi O’Donoghue is a reporter for the Utah InDepth team at the Deseret News with decades of expertise in land and environmental issues.

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