Farmers Limits New Homeowners Policies in California, Prompting Insurer Group to Call for Reform

In a recent development, Farmers has announced that it will be limiting new homeowners insurance policies in California. This decision follows a similar move by State Farm last month and adds to the growing list of major carriers scaling back their operations in the state. The carrier’s statement emphasizes their commitment to working with the California Department of Insurance and other stakeholders to improve the availability of property insurance. Farmers cites record-breaking inflation, severe weather events, and rising reconstruction costs as factors influencing their decision to limit new policies.

The American Property Casualty Insurance Association (APCIA) has responded to this announcement by calling for reform of California’s primary insurance law, Proposition 103. Enacted in 1988, this law requires carriers to obtain prior approval from the California Department of Insurance for property/casualty insurance rates. The APCIA argues that Proposition 103, along with the threat of wildfires, inflation, pricing challenges, and other factors, has created a distressed insurance and reinsurance market in California. State Farm, Allstate, AIG, and Chubb are among the other major carriers that have reduced their involvement in writing homeowners insurance in the state.

David A. Sampson, President and CEO of the APCIA, expressed concerns about the outdated regulatory framework and its impact on insurers’ ability to protect policyholders and manage risk exposure. Sampson highlighted the severe droughts, historic wildfires, high inflation, supply-chain disruptions, and legal system abuses as additional factors contributing to the challenges faced by the California insurance market. He stressed the need for real solutions to address these issues and create a functioning and thriving insurance marketplace in California.

The California Department of Insurance (CDI) has responded to these developments, assuring the public that Farmers is one of over 100 companies continuing to write new homeowners policies in the state. CDI spokesperson Michael Soller stated that Californians have a range of choices, including Farmers, and that the company has maintained its historical average of writing approximately 7,000 new homeowners policies per month. Soller emphasized that the CDI does not anticipate a significant change in Farmers’ presence in the state, as the company remains committed to serving California in the long term.

The APCIA’s call for reform suggests several solutions for the California insurance marketplace. These include allowing the use of catastrophe modeling and reinsurance in rate filings, reforming the rate filing process to ensure timely reviews, and addressing the assessment process of the California FAIR Plan. The association also advocates for expanded wildfire mitigation efforts to reduce risk and increase coverage availability in high-risk areas. Sampson emphasized the need to modernize Proposition 103, which he believes is ill-equipped to handle the challenges posed by climate change and is a contributing factor to the current upheaval in the insurance market.

As discussions continue regarding the future of insurance regulations in California, it remains essential to find a balance between protecting policyholders, managing risks, and ensuring the availability of coverage in a rapidly changing environment.

Related Topics: California, Carriers, Agribusiness, Homeowners

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