State Farm cuts 72,000 California home insurance policies: 'Decision was not made lightly'
State Farm, California's largest home insurance company, announced it would be discontinuing coverage for 72,000 homes and apartment policies in the state starting this summer.
The insurer blamed inflation, regulatory costs, and the increasing risks from catastrophes for its decision to scale back in the blue state.
"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," State Farm announced in a March 20 statement.
"State Farm General takes seriously our responsibility to maintain adequate claims-paying capacity for our customers and to comply with applicable financial solvency laws. It is necessary to take these actions now," it continued.
About 30,000 home policies and 42,000 commercial apartment policies will be affected by the change. State Farm said these policies accounted for just over 2% of its general policy count in the state.
The decision is the latest blow to California property owners, as insurance companies continue to raise rates for customers or discontinue coverage.
State Farm announced last year it would stop accepting new home insurance applications in California due to "historic" increases in construction costs and inflation.
The company then raised rates a whopping 20 percent for existing customers, according to the San Francisco Chronicle.
In 2022, insurance giant AllState also paused its sales of new home insurance policies in California due to wildfires and higher costs of doing business in the state.
According to KCRA, seven of the 12 largest insurance groups in California have either paused or restricted new homeowner policies in the past year.
Thousands of Californians have also been impacted by smaller companies pulling out of the state due to increased costs.
With private insurance companies unwilling to issue new policies to homeowners with sky-high premiums and in "risky areas," many are resorting to state-run insurance programs like the "FAIR Plan," which The Sacramento Bee deems the state's "insurer of last resort," and still have to pay much more than they had been before.
Fox Business' Julia Musto contributed to this report.