California wildfires have destroyed thousands of homes and businesses, and have proved costly to insurance companies in the state.
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State Farm said it won’t accept new applications for business and personal lines of property and casualty insurance in California.
The change went into effect on Saturday, with the company citing “rapidly growing catastrophe exposure” as a key reason.
California has seen an average of over 7,000 wildfires per year in the past five years, per CNN.
State Farm is no longer accepting new applications for homeowners insurance from California residents, citing construction costs and catastrophic events.
The largest auto and home insurance provider stopped accepting the applications of all business and personal lines of property and casualty insurance on Saturday, according to a Friday announcement.
The change won’t impact those with personal auto insurance, and current property and casualty insurance holders can still file claims for property that’s already covered by State Farm.
“State Farm General Insurance Company made this decision due to historic increases in construction costs outpacing inflation, rapidly growing catastrophe exposure, and a challenging reinsurance market,” the statement from insurance giant said.
In 2021, Northern California suffered the state’s 15th largest wildfire in history. California has experienced over 7,000 wildfires per year on average for the past five years, CNN reported. The devastating blazes have destroyed thousands of homes.
In the event of a loss, providers covering property could be required to cover emergency food and shelter, personal property and valuables, the removal of debris, damage to the property, and more, per the California Department of Insurance.
“Insurance companies prioritize their short-term financial goals, the long-term goal of the Department of Insurance is protecting consumers,” California Department of Insurance spokesperson Michael Soller told CNN.
Soller continued: “It’s important to note that current State Farm customers are not affected, and no non-renewals are being issued as a result of this announcement.”
“We pledge to work constructively with the CDI and policymakers to help build market capacity in California,” Friday’s statement from State Farm said. “However, it’s necessary to take these actions now to improve the company’s financial strength.”
In January, State Farm told Insider that the insurance provider “temporarily stopped accepting new customer applications in some states for certain model years and trim levels of Hyundai and Kia vehicles because theft losses for these vehicles have increased dramatically.”