New York
CNN
—
State Farm is stopping new home insurance sales in California, citing wildfire risks and skyrocketing construction costs, the company announced Friday.
The insurance giant stopped accepting applications for all business and personal lines property and casualty insurance in California on May 27. However, State Farm’s decision does not affect existing auto insurance.
“State Farm General Insurance Company made this decision due to historic increases in construction costs outpacing inflation, rapidly growing catastrophe exposure, and a challenging reinsurance market,” the company said in a statement.
California has seen an average of more than 7,000 wildfires each year, consuming an average of over 2 million acres, over the past five years, according to data from the governor’s office. Scientists and California authorities blame the climate crisis for the intensity of the fire seasons.
While “insurance companies prioritize their short-term financial goals, the long-term goal of the Department of Insurance is protecting consumers,” California Department of Insurance spokesperson Michael Soller said.
The factors behind State Farm’s move are beyond the agency’s control, Soller added.
“It’s important to note that current State Farm customers are not affected, and no non-renewals are being issued as a result of this announcement,” Soller said.
State Farm, which is the largest provider of auto and home insurance in the US with its affiliates, claimed it would still work with the California Department of Insurance and lawmakers to build up market capacity in the state.
“However, it’s necessary to take these actions now to improve the company’s financial strength,” State Farm said, adding it will reevaluate according to market conditions.
The Illinois-based insurance group said its agents will continue to work with existing customers.
Last year, American Insurance Group said it would pull policies for multimillion-dollar homes in California, partly because of wildfire risk, the Wall Street Journal reported.