Business Journal – Farmers Insurance to Limit Number of California Homeowners Policies

By Anthony Duignan-Cabrera, BUSINESS JOURNAL

Farmers Insurance announced Friday it would be limiting the number of homeowners policies throughout California.

The company said it would not be accepting any new business beyond what it had already planned for 2023. That news comes as the state’s wildfire season, which began last month, is set to last until November.

“We are working diligently with the California Department of Insurance and others interested in improving the availability of property insurance in the state,” Farmers Insurance said in a statement. “With record-breaking inflation, severe weather events and reconstruction costs continuing to climb, we are focused on serving our customers while effectively managing our business.”

Farmers is California’s second-largest insurer, and its announcement comes on the heels of both Allstate Insurance Company, the state’s leading insurer, and State Farm Insurance putting an end to new homeowners’ policies in the state.

The Farmers Insurance website has limited functionality now, advising consumers to contact their local representatives. The new policy went into effect July 3, four days prior the formal announcement.

According to Harvey Rosenfeld, founder of Consumer Watchdog, Farmers is not being transparent about its costs and revenue.

“It’s a complete lie,” Rosenfeld told CBS News Bay Area in an interview. “We went back and looked. For the last 30 years, insurance companies in California have made four times the profit that they made nationally on the average for selling homeowners coverage.”

Requests for comment from Farmers Insurance by the Silicon Valley Business Journal were not returned.

In an Insurance Journal report, the American Property Casualty Insurance Association (APCIA) called for massive reform in California’s primary insurance law following the Farmers’ policy change.

APCIA wants to change Proposition 103, a law passed in 1988 requiring carriers to get prior approval from the California Department of Insurance before implementing property/casualty insurance rates. The proposition outlines factors used to decide the ratings.

The proposition says the state must require insurers to use 20 years of historic risk modelling to price current risks. This has proved to be a point of contention for insurers.

“Prop 103 is a disincentive to insurers to issue policies in the high-risk areas. Because homes didn’t exist there before, there were no wildfire losses,” Karen Collins, vice president of property & environment at the American Property Casualty Insurance Association told Bloomberg Law in June.

Michael Soller, a spokesman for state Insurance Commissioner Ricardo Lara, told the Sacramento Beethat despite the Farmers announcement or the decisions by Allstate and State Farm to halt new policies, Farmers and more than 100 other companies continue to accept new homeowners’ business in California.

“The Department of Insurance understands Farmers has been writing 7,000 monthly new homeowners’ policies on average,” Soller said, “We do not expect their footprint in the state to change significantly one way or another. By maintaining its historic average of new homeowners’ policies in California, Farmers is showing its continued commitment to the Golden State for the long haul.”

According to Rex Frazier, president of the Personal Insurance Federation of California, insurers can only insure based on the amount of capital they have available to support the policies. If the capital is not sufficient, they can’t issue new policies. That’s why State Farm and Allstate stopped writing new policies, Frazier told the Bee.

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