State Farm drops home insurance to new customers

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dbt1949
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State Farm drops home insurance to new customers

Post by dbt1949 »

I suspect they'll raise the hell of existing customers too. Other insurance are sure to follow suit. I can understand why they are doing it but what a slimy thing to do.
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Re: State Farm drops home insurance to new customers

Post by Smoove_B »

Link to news story:
The insurance giant State Farm, America’s biggest car and home insurer by premium volume, will halt the sale of new home insurance policies in California, citing wildfire risk and inflation of construction costs.

Starting on Saturday, the company will not accept insurance applications for business and personal lines property and casualty insurance. The company will still accept auto insurance applicants.

“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 company said in a statement.
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Re: State Farm drops home insurance to new customers

Post by LawBeefaroni »

The alternative is to charge insane premiums.

I assume federal relief will allow Californians to continue to build in firebreaks?
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Re: State Farm drops home insurance to new customers

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I have my car insurance with them. $24 a month.
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Re: State Farm drops home insurance to new customers

Post by Formix »

I've had State Farm Auto for 37 years, and either renters or home insurance with them for 30. This, however, really makes me think. Maybe it's time to shop around.
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Re: State Farm drops home insurance to new customers

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My father in law had them many years but when he filed a claim back in the 90s they denied it so he dumped them.
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Re: State Farm drops home insurance to new customers

Post by malchior »

Not defending State Farm but this is being primarily driven by climate change. We're seeing the same thing in Florida and Texas right now. The current financial system is being overwhelmed by disaster costs running head on into a lack of capacity to respond to them. And we're doing far too little to stop the root problem. (Actually the debt ceiling "deal" will likely make it worse in the name of energy security).
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Re: State Farm drops home insurance to new customers

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In before the lock.
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Re: State Farm drops home insurance to new customers

Post by Octavious »

Florida and California are the reason my wife's company went broke. (Among many other reasons.) Those places are horrific to insure for a multitude of reasons. No idea what the solution is, but I really can't blame companies that don't want to deal with it.
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Re: State Farm drops home insurance to new customers

Post by Smoove_B »

Exactly. You can't expect insurers to intentionally take on the risk. Just like flooding and how the federal government subsidizes and/or provides insurance for some areas, there might need to (real soon) be a supplemental wildfire policy that's backed by the feds.

BUT we also need to do a better job of mitigating hazards in the short term (like not letting people build back in flood and fire zones) while also enacting longer term policies to lower risk of catastrophic events happening in areas that people want to convert to housing or businesses (zoning, environmental laws, raking the woods, etc...)

So it's dealing with what's already out there (the homes currently at risk) while simultaneously not allowing future risks to emerge (which is what State Farm is currently enacting by refusing to insure new projects).
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Re: State Farm drops home insurance to new customers

Post by Blackhawk »

I can't really blame them. Insurance companies survive by not needing to pay. For every $100,000 house that burns down and they have to pay for, there are 400 that do not burn down. The 400 pay enough in insurance to pay for the one that did burn down, plus the company's operating expenses (plus profit, presumably.) They set their prices in a way that balances paying for claims against keeping customers and being competitive, with a little extra for profitability. The more houses that burn down, the more the other 400 have to pay to keep the company at the same financial level.

The way wildfires and floods are happening these days, some areas have so much destruction that the number of homes being destroyed is growing, while the number surviving shrinks. At some point, the expenses become higher than the income, and the company either changes their policies, cranks the prices on the homes that aren't destroyed to compensate, or goes out of business.

It isn't just corporate greed (although that is undoubtedly a factor as well.)
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Re: State Farm drops home insurance to new customers

Post by Isgrimnur »

It’s almost as if for-profit insurance is a pyramid scheme.
It's almost as if people are the problem.
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Re: State Farm drops home insurance to new customers

Post by malchior »

Isgrimnur wrote: Sun May 28, 2023 1:50 pm It’s almost as if for-profit insurance is a pyramid scheme.
That is why it is heavily regulated.
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Re: State Farm drops home insurance to new customers

Post by noxiousdog »

State Farm is a mutual insurance company. The policy holders are the shareholders and owners.
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Re: State Farm drops home insurance to new customers

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Re: State Farm drops home insurance to new customers

Post by Kraken »

I read a somewhat histrionic argument that this signals "the extinction economy," wherein the ever-escalating effects of global warming will overwhelm institutions' ability to cope one-by-one. State Farm's business model assumes they'll have to replace, say, 400 homes in CA each year. They can handle 1,000 in outlying years. But when the outliers become routine and the future looks even bleaker, insurance doesn't work anymore.
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Re: State Farm drops home insurance to new customers

Post by noxiousdog »

Yes, they are a corporation and have to post their financials. The owners are the policy holders.

You can't go buy shares; you can only buy policies.

I don't know where the profits go any more than with universities or non profit hospitals. But it's a real thing.
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Re: State Farm drops home insurance to new customers

Post by Pyperkub »

Smoove_B wrote:Exactly. You can't expect insurers to intentionally take on the risk. Just like flooding and how the federal government subsidizes and/or provides insurance for some areas, there might need to (real soon) be a supplemental wildfire policy that's backed by the feds.

BUT we also need to do a better job of mitigating hazards in the short term (like not letting people build back in flood and fire zones) while also enacting longer term policies to lower risk of catastrophic events happening in areas that people want to convert to housing or businesses (zoning, environmental laws, raking the woods, etc...)

So it's dealing with what's already out there (the homes currently at risk) while simultaneously not allowing future risks to emerge (which is what State Farm is currently enacting by refusing to insure new projects).
But, to a degree, you *have* to.

Fire insurance is mandatory for a home loan as I recall....

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Re: State Farm drops home insurance to new customers

Post by Smoove_B »

Pyperkub wrote: Tue May 30, 2023 10:17 pm Fire insurance is mandatory for a home loan as I recall....
Yeah, if you're building a new one. Or trying to re-finance an existing one. That's why State Farm is saying they're no longer issuing new policies. And I'm sure existing policies in wild-fire areas are going to experience price increases.
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Re: State Farm drops home insurance to new customers

Post by Pyperkub »

Smoove_B wrote:
Pyperkub wrote: Tue May 30, 2023 10:17 pm Fire insurance is mandatory for a home loan as I recall....
Yeah, if you're building a new one. Or trying to re-finance an existing one. That's why State Farm is saying they're no longer issuing new policies. And I'm sure existing policies in wild-fire areas are going to experience price increases.
They already have. I live in an area of CA where we've never had a wildfire, but a recent study says we're at high risk, and our HOA fire policy went through the roof last year (needed a $4k assessment just to get a policy, tho we switched management firms and got a better policy ).

And Earthquake insurance is already so insane nobody can really afford it, but at least that's not mandatory for a mortgage.


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Re: State Farm drops home insurance to new customers

Post by waitingtoconnect »

It’s similar in Australia. Many areas they were not high risk have been reclassified. You can be charged up to $90,000 dollerydoos for cover in high risk areas (that’s roughly 50,000 US dollars)
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Re: State Farm drops home insurance to new customers

Post by Zarathud »

That’s the market correcting. You can take the risk but can’t pass it on because insurers don’t view the world through politics.
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Re: State Farm drops home insurance to new customers

Post by Smoove_B »

Zarathud wrote: Wed May 31, 2023 8:49 pm That’s the market correcting. You can take the risk but can’t pass it on because insurers don’t view the world through politics.
Or at least recognize when politics are involved, they need help.

That's what is so interesting (terrifying? depressing?) about where we're headed. Above and beyond politicians grand-standing that humans aren't currently and haven't ever impacted the global environment, insurance companies are telling another story. Flooding, Higher-energy storms. Wildfires. Politicians and voters can try to ignore the impacts but insurance companies aren't going to go broke paying out money over known risks.
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Re: State Farm drops home insurance to new customers

Post by Smoove_B »

Might need to update the thread title:
A second national insurance company is no longer providing coverage to new customers in California, citing rising costs.

Allstate quietly stopped issuing property and casualty coverage to new California customers last year. The company made the announcement in November during its 2022 third quarter earnings report, Allstate spokesperson Brittany Nash said in a statement. The company will offer continuing coverage to existing customers.

"We paused new homeowners, condo and commercial insurance policies in California last year so we can continue to protect current customers," the statement said. "The cost to insure new home customers in California is far higher than the price they would pay for policies due to wildfires, higher costs for repairing homes, and higher reinsurance premiums."
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Re: State Farm drops home insurance to new customers

Post by LawBeefaroni »

It's because California law does't allow rate increases based on future risk/prices. Just past risk. With costs of homes and replacement/repair soaring and projected to continue, not to mention increasing fire risk, insurers opt to leave rather than write losing policies.
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Re: State Farm drops home insurance to new customers

Post by Smoove_B »

Another suggestion to update the thread title:
Farmers Insurance Group is no longer writing new property insurance policies in Florida, the company confirmed to News 6 on Friday.

A memo sent to agents and obtained by News 6 shows Farmers instituted a restriction on writing new policies in the state, effective Feb. 1.

“In Florida especially, we’ve seen a mix of various unique challenges, and catastrophe costs are at historically high levels,” the memo said. “Housing prices are increasing, and inventory supply and demand, lumber prices and costs of labor are contributing to the increase. These issues also are increasing the costs of claims, which in turn drives down profitability.”
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Re: State Farm drops home insurance to new customers

Post by dbt1949 »

I guess the government will be taking over insuring all these people across the country.
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Re: State Farm drops home insurance to new customers

Post by Unagi »

Why would they suddenly take on an insurance role?
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Re: State Farm drops home insurance to new customers

Post by malchior »

Unagi wrote: Thu Jun 15, 2023 5:29 am Why would they suddenly take on an insurance role?
The US government tends to become the insurer of last resort (National Flood Insurance/FEMA-Disaster Aid/COVID emergency aid/Medicare/Medicaid/SSI/etc.). Krugman calls the United States an insurance company with an army. Not a bad description.

There will be pressure generated here to act. We will start to see real short-term impacts. Banks will be greatly less likely to offer mortgages to people or fund construction projects where insurance isn't available.

It's not just California or Florida. We're seeing the same in Louisiana. Texas is soon going to be on the list (it's reinsurance market is imploding presently). Several of the most populous states in the country with unstable insurance markets? That's trouble. I could see a near-term where the US government tries to prop up reinsurers or act as one to stabilize the situation. Yet it remains to be seen how sustainable or how much appetite there is to do so. We're dysfunctional so who knows how the idea could even play out if it gains momentum.
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Re: State Farm drops home insurance to new customers

Post by LawBeefaroni »

LawBeefaroni wrote: Sat May 27, 2023 10:06 pm
I assume federal relief will allow Californians to continue to build in firebreaks?
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Re: State Farm drops home insurance to new customers

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Farmers Insurance is leaving its business in Florida after leaving California
Farmers Insurance will stop writing new business and not renew its existing “Farmers-branded” automobile, home and umbrella policies in the Sunshine State, the company said Tuesday.

On Monday, Farmers sent notice of its plans to the Florida Office of Insurance Regulation, which is reviewing it. Insurers must give the office 90 days' notice if they want to discontinue writing business in Florida.
...
The move will impact 30% of the company's business in Florida, or roughly 100,000 policies. Policyholders affected by the decision are required to be given 120 days' notice that their coverage will not be renewed.
...
Policies under its other brands such as Bristol West, Foremost Signature, Farmers GroupSelect, Foremost Choice and Foremost-branded policies will not be affected.

This marks the latest stumble into instability for Florida’s property insurance market. Seven Florida property insurers were declared insolvent in the past 18 months, and another 15 have stopped writing new business in the same time period, Friedlander said.
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Re: State Farm drops home insurance to new customers

Post by Octavious »

NYC is becoming a problem too because of the recent floods the last few years. My MIL has a store in Queens and got non renewed despite never having a claim. She's been scrambling to find anyone that will cover her.
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Re: State Farm drops home insurance to new customers

Post by Smoove_B »

AAA is also leaving Florida:
AAA will not renew the auto and home insurance policies for some customers in Florida, joining a growing list of insurers dialing back their presence in the Sunshine State amid a growing risk of natural disasters.

"Unfortunately, Florida's insurance market has become challenging in recent years," the company said in a statement emailed to CBS MoneyWatch. "Last year's catastrophic hurricane season contributed to an unprecedented rise in reinsurance rates, making it more costly for insurance companies to operate."

AAA declined to say how many customers won't have their policies renewed, saying only that the change will affect "a small percentage" of policy holders.
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Re: State Farm drops home insurance to new customers

Post by Blackhawk »

Seven weeks. This thread is seven weeks old, and we've gone from, "Huh? They did what?" to an avalanche.
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Re: State Farm drops home insurance to new customers

Post by msteelers »

Blackhawk wrote:Seven weeks. This thread is seven weeks old, and we've gone from, "Huh? They did what?" to an avalanche.
It’s been going on for years here in Florida.

The insurance companies and politicians swear up and down that it’s because of fraud and the highest rate of lawsuits in the country. They’ve recently passed laws that should make it much harder to take insurance companies to court, so the prices will naturally come down here soon.

Right?









Right?
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