by Giulia Carbonaro at Newsweek
State Farm, one of the biggest insurers in California, canceled hundreds of homeowners’ policies last summer in Pacific Palisades—the same area which is now being ravaged by a devastating wildfire.
The move was justified by the company as an attempt to avoid “financial failure” as the frequency and severity of wildfires is growing in the Golden State, especially in at-risk zones. But as the multiple fires currently burning through Southern California threaten to cause devastating losses for residents, many will likely need to rely on their insurers to get back on their feet after the blazes are contained.
Newsweek contacted State Farm and the office of Commissioner Ricardo Lara for comment by email on Wednesday early morning, outside of standard working hours.
Why It Matters
Several private insurers have cut coverage in at-risk areas across California in the past three years, leaving homeowners scrambling to find options for coverage. As a result, California’s FAIR Plan, which works as an insurer of last resort in the state, has more than doubled its policies between 2020 and 2024, reaching a total of 452,000, as reported by CapRadio.
Most insurers who have limited their offer in the state mentioned the rising wildfire risk as well as the state’s regulations as the main reasons behind their decision. Unable to increase their premiums to a level that will match their growing risk, companies have decided instead to cut coverage.
This has triggered an ongoing property insurance sector crisis in the Golden State as homeowners are finding it increasingly harder to find coverage at a time when they so desperately need it.