Why has State Farm stopped writing policies in California?

Rex Frazier, president of the Personal Insurance Federation of California, says State Farm leaving California is due to several factors impacting other companies as well.

He notes that inflation is driving up the price of building materials and home reconstruction, increasing insurers' costs. 

However, insurance companies in California have difficulty passing on these higher costs to customers. Insurers operating in the state are subject to price controls and must file an application seeking approval to raise rates. 

"In times of rapid inflation like today, it is difficult to operate a business when underlying costs are rising significantly," Frazier says. "But it takes six months or more to raise rates through the state approval process."

In addition, as other insurers have declined to renew customers' policies in wildfire-exposed California areas, State Farm has absorbed many of these customers, Frazier says. That has raised State Farm’s reinsurance costs.

"California is the only state in the country that does not allow insurers’ rates to be based upon their actual reinsurance costs," he says.

In September of 2023, California lawmakers moved to make changes that would allow insurers to consider the impact of climate change when calculating rates.

How many companies have left California?

It's important to note that not all companies mentioned here have entirely left California. Some simply aren't writing any new policies, something that could change. However, so far, we know that these six companies have pulled back in some form from California home insurance:

  • State Farm
  • Allstate
  • AIG
  • Chubb
  • Falls Lake Insurance

What are some other home insurance options for California homeowners?

Gabriel Sanchez, press secretary for the California Department of Insurance, says State Farm's announcement is not the first of its kind in the state. 

“The Department of Insurance has seen companies pause and then re-start writing policies as conditions change,” he says. 

He adds that the factors behind State Farm’s decision to stop writing new policies “are beyond our control,” including worldwide inflation, climate change and reinsurance costs impacting the entire insurance industry. 

"While insurance companies prioritize their short-term financial goals, the long-term goal of the Department of Insurance is protecting consumers," Gabriel says. 

Although seeing a handful of insurers pull back probably has some California homeowners concerned, State Farm's California insurance departure doesn't leave them without options. There are still plenty of options for those looking for home insurance coverage in the state, including:

  • Travelers
  • USAA
  • Auto Club Enterprises (AAA)
  • Nationwide
  • State Farm
  • CSAA Insurance (AAA)
  • Mercury Insurance

Gabriel says more than 115 insurance companies currently offer California homeowners insurance. 

In addition, he notes that this doesn't mean State Farm is canceling homeowners insurance policies already in force. Existing State Farm California property insurance policies will not change.

"It’s important to note that current customers will not lose their insurance," Gabriel says. "There are no non-renewals taking place with State Farm’s announcement."

Homeowners who live in areas at high risk -- such as places that have traditionally been in the path of wildfires – and who have struggled to secure homeowners insurance coverage can purchase a policy through the California Fair Plan

However, this coverage is typically more expensive than what homeowners will find in the traditional home insurance market.

How to find the best homeowners insurance policy in California

California can be expensive, but homeowners insurance rates are the second most affordable in the country, according to a recent Insurance.com survey of rates.

In 2022, it cost an average of $1,380 a year -- or $115 a month -- to insure a home in California. That is much lower than the national average annual rate of $2,777.

Whether shopping for homeowners insurance in California or elsewhere, you can do plenty of things to save even more. 

  • Understand your coverage needs before you shop; cutting coverage is not a good way to save.
  • Compare quotes from several providers before you buy.
  • Look for companies with strong customer service reputations and solid finances. Using sources such as J.D. Power and AM Best can help you understand which companies are leaders in the industry. 

Another great resource is Insurance.com's rankings of the best homeowners insurance companies.


Newsroom State Farm. "State Farm General Insurance Company" Accessed June 2023

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