Last Updated on July 18, 2023 by BVN
Just before the fires erupted across parts of the inland region this past weekend, Farmers Insurance Company announced it would no longer write new policies in California.
The announcement did not surprise many who have been following this issue as it comes on the heels of similar announcements by both Allstate and State Farm.
You may be surprised to learn that California is not only the largest insurance market in the U.S., it is the fourth largest market in the world. Regardless of the profits these corporations make in the state however, insurers appear to be weighing the risk and the continuing impact of a changing climate coupled with the industry’s growing concern over expansive wildfires and the costly claims that result against their bottom lines and apparently deciding that expanding coverage in this state is untenable as it may cut too deeply into their capital reserve requirements.
But, that may not be the only concern. A question remains as to whether ‘insurers have expanded coverage in the state beyond their ability to serve such a large market?
Still others believe the insurance cutbacks are being driven by the industry’s purported inability to raise rates quickly enough due to state regulations and other factors like the cost of rebuilding in the wake of wildfires and related inflationary pressures. All of these may be concerns in addition to drought and other impacts of a changing climate.
Meteorologists estimate that 400,000 to one million acres may burn across the state this year which could mean slightly above average fire dangers due to storms this past winter that gave birth to more brush to fuel fires this season. This puts the state at average or slightly above average for fire dangers later in the summer.
If there is any good news in all of this, it’s that although the big named carriers are bowing out because they are skittish about writing new policies, there are at least 100 insurance carriers still doing business in the state.
If you have questions or concerns about your insurance or are in the market for a new policy, resources are available on the California Department of Insurance’s website.
I encourage you to stay informed on this important issue. Today some insurers are shying away from writing new policies, the next step could well be deciding not to renew existing policies.
Of course this is just my opinion. I’m keeping it real.