By Hope Patti, LAW360
More than three years after announcing it would no longer sell new homeowners insurance policies in California, State Farm has filed plans to begin writing new policies for Golden State homeowners who have made their properties more resilient to wildfire, according to news releases issued Wednesday.
State Farm General Insurance Co. announced that it will consider new insurance applications for homes that meet the Insurance Institute for Business & Home Safety’s “wildfire prepared home” standard.
Homes with an enhanced wildfire prepared home designation will be eligible statewide, while properties with the “base” designation will be subject to geographical limitations and wildfire risk, the California Department of Insurance said of the plan in a separate news release.
According to State Farm, the wildfire prepared home program “focuses on practical mitigation steps such as defensible space and home hardening that can help reduce the risk of wildfire damage when properly completed and maintained.”
The insurer added that it believes that “verified methods should be part of the long-term solution for improving resilience and supporting insurance availability in California.”
Although barriers still remain for homeowners seeking to make their homes more resilient, State Farm said it is encouraged by recent legislative efforts to make mitigation more affordable.
Speaking to Law360 on Wednesday about State Farm’s planned return, Jamie Court, president of the consumer advocacy group Consumer Watchdog, cautioned that the Insurance Institute for Business & Home Safety standard is a tough one to meet, even for individuals who have done a good job of hardening their homes.
Court said there needs to be a more realistic set of home hardening standards for homeowners to follow, adding that anyone who hardens their home should be guaranteed a policy.
According to the Consumer Watchdog president, there are currently bills on Gov. Gavin Newsom’s desk aimed at creating a statewide standard for community hardening. If signed, Court said the insurance commissioner would be able to develop realistic standards for homeowners and get insurers in the state on board to sell policies to individuals who meet the criteria.
“That’s what’s needed to fix the market,” Court said.
The California Department of Insurance also announced Wednesday that Allstate, one of California’s top 10 largest homeowners insurance providers, has signaled its intent to begin writing new policies for the first time since November 2022.
Allstate’s filing was made under the CDI’s Sustainable Insurance Strategy, which California Insurance Commissioner Ricardo Lara introduced in an effort to bring stability to the insurance market. With Allstate, 12 insurers have filed or received approval under the SIS framework, according to the CDI’s announcement. State Farm did not file under that framework; however, the department said that it continues to urge State Farm to join the other carriers.
The availability and affordability of insurance has been a major issue for California in recent years as more frequent and severe disasters have prompted insurers to either leave or restrict business in the state or raise rates. The back-to-back departure of Allstate and State Farm, two of the state’s largest carriers, was a defining moment of that crisis.
“Both of these companies’ filings to reopen are an equally clear signal in the other direction: Options for Californians are increasing,” Lara said in a statement.
Consumer Watchdog’s Court countered that the commissioner’s claim that the market is recovering is “overly optimistic,” saying there is still more work to be done.
“It’s not contracting. … That’s the best he can say,” Court told Law360.
The CDI noted that neither State Farm nor Allstate is open for business yet, and that both filings are subject to review and discussions with the carriers.
“A filing is a starting point, not a finish line,” Lara said. “My department will continue to be aggressive in our review until these companies are writing policies at the scale Californians need, especially in the communities that need them most.”
–Editing by Bruce Goldman.
