Finding insurance in California, especially for fires, may prove increasingly difficult as many large providers have reduced or pulled their coverage.
Farmers Direct Property and Casualty Insurance is one of the latest, after surrendering its certificate of authority Sept. 15 in California, which means the primarily home and auto insurance provider no longer offers policies to Californians.
A spokesperson for the company told The Epoch Times its decision was due to an initiative by its parent company, Farmers Insurance, to “increase operation efficiency and mitigate risk exposure,” among other issues.
According to the spokesperson, the discontinuation won’t affect policies issued by other entities under Farmers, such as Bristol West and 21st Century.
“Importantly, customers with policies issued by other Farmers entities ... representing 98% of all Farmers property and casualty policies in the state—are not affected by this action,” the spokesperson said in an email.
California Insurance Commissioner Ricardo Lara said in a Sept. 21 press release that some providers in the state are temporarily not writing new policies, not-renewing existing consumers, and are increasing rates after wildfires and storms.
“We are at a major crossroads on insurance after multiple years of wildfires and storms intensified by the threat of climate change. ... The current system is not working for all Californians, and we must change course. I will continue to partner with all those who want to work toward real solutions,” Mr. Lara said.
In the same press release, Mr. Lara announced new rules to be implemented by the end of 2024 requiring insurers to write at least 85 percent of their policies in high-wildfire-risk communities, as part of what the state is calling its California Sustainable Insurance Strategy, a plan aiming to expand insurance options in the state—which some industry experts call the biggest reform in over 30 years.
The recent departure of Farmers Direct impacts roughly 58,000 auto and nearly 20,000 home policies, but those impacted can find coverage from the California Home Insurance Finder, a tool offered by the state’s insurance department. Additionally, as a last resort, the so-called FAIR plan—which provides some basic coverage when other insurers aren’t available—is available but premiums are usually much higher.
Currently, insurance companies may not write policies for high-risk areas where a foreseeable fair return is not expected, since they may not have the capital to meet all claims, according to the recent press release by Mr. Lara’s office.
Under the new rules California will require insurers to have a minimum of policies—at least 85 percent of their underwriting, for high risk areas and require them to offer discounts to homeowners who have mitigated wildfire risks at their homes or properties.
Additionally, the plan makes improvements to the FAIR plan by expanding commercial coverage to $20 million per building allowing, in part, for more coverage for condominiums and homeowners associations, according to Mr. Lara.
Also in September, Gov. Gavin Newsom signed an executive order urging Mr. Lara take immediate action to strengthen insurance for consumers, after what he called significant weather-related disruption.
“This is yet another example of how climate change is directly threatening our communities and livelihoods. It is critical that California’s insurance market works to protect homes and businesses in every corner of our state,” he said.
The order resulted in the recent strategy by the insurance department, with some thanking the changes.
“[The California Building Industry Association] applauds Governor Newsom and Commissioner Lara’s commitment to California consumers and the steps they are taking to address California’s insurance crisis. Increasing Fair Plan commercial limits to $20 million per structure will reduce barriers to home construction and ownership,” said Dan Dunmoyer, the organization’s president and CEO, in the same press release.
The Fire Safe Council—a nonprofit focused on community wildfire risk reduction in California—was additionally pleased by the new program’s rewarding homeowners who shore up their properties to stave off fire.
“In a state where wildfire occurs year-round, it’s imperative that we learn to live alongside fire and adapt our lifestyles to it, which includes mitigating risks,” the organization’s Program Director Jessica Martinez said in the same announcement.
Earlier this year, State Farm announced it would stop accepting new business for casualty and property insurance, but would continue to accept auto policies.
Allstate, around the same time, stopped issuing new policies for commercial properties and homeowners, according to media reports. And in late September, AmGUARD Insurance, a subsidiary of Berkshire Hathaway, said it would also withdraw from California, in addition to Falls Lake Insurance, which said it would drop its current homeowner’s policies.
