San Francisco Chronicle – These Charts Show How California’s Home Insurance Market is Transforming


Last week, Farmers Insurance, California’s second-largest homeowner insurance carrier, announced that it will no longer issue new policies in the state. Following in the footsteps of market leaders State Farm and Allstate, the company cited severe weather events, rising construction costs and challenges with reinsurance as reasons for pausing on new policies.

California’s homeowners now have fewer large insurance companies as options for coverage, which could lead to a potential hike in existing premiums, according to industry experts. 

The recent upheaval in the market prompted The Chronicle to dig into the data on the state of California’s home insurance. Below are five charts that show how the market is evolving, using the latest available public data.

Who is leading California’s private insurance market?

According to data from the California Department of Insurance, there were around 9 million homeowner insurance policies in the state as of 2021. 

There are more than 100 companies serving the private insurance market, and 97% of all policies come from private insurers. In 2022, State Farm was the biggest provider of homeowners insurance. It had 21% of the market share in 2022, up from 17.6% in 2017. 

“State Farm’s grown so precipitously,” said Rex Frazier, president of the Personal Insurance Federation of California, an advocacy association of insurers in the state. “They’ve absorbed the policyholders that otherwise would have gone to other companies. It is the only company that has not nonrenewed wildfire-exposed policyholders in the last six years,” Frazier said. 

Now that State Farm is no longer issuing new policies, it is likely to lose market share.

More turnover in the market

Over the past five years, there has been an increase in the share of homeowner policies that were canceled or not renewed. This upward trend includes cancellations and nonrenewals initiated by insurers and consumers. In 2021, 13% of the total market policies were nonrenewed, compared with 11% in 2018. “It’s too early to tell if the number of nonrenewals will continue to increase,” said Michael Soller, deputy commissioner for communications at the state insurance agency.

The rise of the FAIR Plan

The state-offered Fair Access to Insurance Requirements Plan, or FAIR Plan, is a temporary insurance of last resort that many residents now rely on. The plan provides fire insurance when consumers can’t access coverage through the private market. It is more expensive than other plans in the market. The number of FAIR policies in the state has almost doubled since 2018 from about 140,000 to over 260,000. However, they still constitute only 3% of the market. 

FAIR Plan policies are concentrated in high-risk areas

The FAIR Plan is most popular in counties with the highest risk of wildfire. These policies made up 22% of all policies in the top 10 wildfire-prone counties in 2021. Those counties include Tuolumne, Trinity, Nevada, Mariposa, Plumas, Alpine, Calaveras, Sierra, Amador and El Dorado. 

“It is inevitable that the FAIR Plan will take on more and more of the customers that insurance companies are refusing to write,” said Harvey Rosenfield, the founder of Consumer Watchdog and author of Proposition 103, the 1988 initiative that requires insurance rates to be regulated by an elected commissioner of the CDI. 

Rising premiums

Another cause of concern for residents is the rise in homeowners’ premiums. The average homeowner’s written premium has jumped by 23% up to almost $1,460 in 2021, up from about $1,070 ($1,190 in 2021 dollars) in 2017. 

Premiums still are not high enough to cover costs, said Frazier of the Personal Insurance Federation of California. He complains that the state has lower than national average premiums, despite construction costs well above the national average. 

Insurers in California are not allowed to raise rates without approval from the California Department of Insurance. Insurers claim that the process for getting an approval is too slow, often taking months or years, which they say is particularly challenging in an inflationary environment.

Rosenfield says that the rate approval process is necessary to protect consumers from exploitation.

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