State Farm Stops Writing New Homeowners' Insurance Policies in Calif

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FlamePoint
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Re: State Farm Stops Writing New Homeowners' Iinsuarnce Policies in Calif

Post by FlamePoint »

pizzy wrote: Sat May 27, 2023 9:38 am
StewedCarrot wrote: Sat May 27, 2023 9:28 am a statewide pullout is unfortunate
I don’t consider continuing to renew existing policies a statewide pullout.
Mark my word, they are most likely considering implementing other restrictive measures on existing policies such as non-renewing for minor infractions, declining to reinstate policies that lapse for non-payment, implementing contract language changes to limit their losses, making revisions to their agent contracts to de-incentivize them to keep policies with them, ongoing rate increases as much as allowed, and anything else they can come up with to limit their overall exposure in the state. Ceasing writing policies in the state is just the beginning.
pizzy
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Re: State Farm Stops Writing New Homeowners' Iinsuarnce Policies in Calif

Post by pizzy »

FlamePoint wrote: Sun May 28, 2023 11:38 am
pizzy wrote: Sat May 27, 2023 9:38 am
StewedCarrot wrote: Sat May 27, 2023 9:28 am a statewide pullout is unfortunate
I don’t consider continuing to renew existing policies a statewide pullout.
Mark my word, they are most likely considering implementing other restrictive measures on existing policies such as non-renewing for minor infractions, declining to reinstate policies that lapse for non-payment, implementing contract language changes to limit their losses, making revisions to their agent contracts to de-incentivize them to keep policies with them, ongoing rate increases as much as allowed, and anything else they can come up with to limit their overall exposure in the state. Ceasing writing policies in the state is just the beginning.
I was commenting on the present, not the hypothetical future.
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JackoC
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Re: State Farm Stops Writing New Homeowners' Iinsuarnce Policies in Calif

Post by JackoC »

Stinky wrote: Sat May 27, 2023 3:50 pm
Weathering wrote: Sat May 27, 2023 3:28 pm I wish the state would say to insurance companies, “how can we make CA a place where you can offer insurance? What do we need to do?”
How about “Allow home insurers to set prices at a level that allows them to make a reasonable profit on their California business”.

Price controls on goods or services ultimately lead to shortages of supply. Home insurance is not an exception to that rule.
Yeah the simple 'what do we need to do?' is let the insurance companies would write policies in each area at prices that make them an attractive risk/return proposition for their profit seeking owners. Price controls are an enduring siren song in public policy but they are almost never the best solution with very few exceptions. If the state wants to spend public money for the particular benefit of people who've chosen to live/stay in high risk areas (not pointing fingers, risk could have changed, still either the person living there pays or somebody else does) it might be more efficient to spend that on mitigation like brush clearing or electric line safety etc. vs. spending it subsidizing high risk area insurance without reducing risk, or a system of price regulation that overcharges low risk areas to undercharge high risk ones (that's sustainable as long as the subsidizing customers will put up with it, but inefficient). But there's no real either/or between price controls and risk mitigation. Companies will stay if you don't try to force their owners to net subsidize the provision of their good/service and eventually leave or close down if you do.
Rex66
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Re: State Farm Stops Writing New Homeowners' Iinsuarnce Policies in Calif

Post by Rex66 »

Big Dog wrote: Sun May 28, 2023 10:54 am
Rex66 wrote: Sun May 28, 2023 9:39 am
Big Dog wrote: Sat May 27, 2023 9:25 pm
Rex66 wrote: Sat May 27, 2023 8:04 pm Well if the risk doesn’t turn out to be higher then it gives the appearance the insurance commissioner ignored the actual data, pandered to the insurance industry and didn’t protect the people of the state. Nobody really knows if the risk is going to be higher.

With most of these policies, isn’t the dollar amount for total loss fixed such that increased construction costs aren’t the insurance company’s problem?
That's why the actuaries make the big bucks and have a great quality of life.

The insurance commissioner may or may not be pandering to the industry, but State Farm doesn't think so, and is voting with their feet so to speak.

"Michael Soller, spokesperson for California’s Department of Insurance, said Friday evening via email that the policy change by State Farm was among factors “beyond our control, including climate change, reinsurance costs affecting the entire insurance industry, and global inflation.”"

While it may be true that those items are beyond their control, they are not beyond pricing into today's rates. They know what the global inflation rate is, they know that the the reinsurance market is costing today, and they can also model an increase for climate change. The Insurance Commissioner chooses not to.

btw: replacement cost is replacement cost. Sure, the house may have a max for burning down to the foundation, but what happens if only the roof and one exterial wall burns? What may have cost $50k to repair in 2019, is now $100k. And due to supply chain issues, temporary housing could be months.

https://www.mercurynews.com/2023/05/26/ ... alifornia/

Actuaries can’t do much when the data is really unknown

That’s why ltci struggled.

Additionally the execs make the final decision. So you have companies bail out and others double down like in ltci
Perhaps, but estimating/modeling is what they do. And State Farm was able to model it to make a proposal to the State. Moreover, the answer it not Zero, which Ca seems to think it is.
Of course modeling is what they do but the less accurate the data the less accurate or wider range of results. They don’t have magic. We wouldn’t have the ltci experience we have had if they could accurately determine things with incomplete data. As I mentioned the actuaries aren’t making the final call on what’s presented. That’s why with ltci some companies presented with twice the premium or more. They all had the same data. If you are ceo and you don’t like what your actuary presents you get another.

I have no idea if zero is correct. It probably isn’t but don’t know.

We will have to look back in say 5 years at how the companies who stayed have performed . Predicting Mother Nature can’t be easier than ltci.

I don’t think there is an easy fix. If you cap profit/return surplus then investors call foul and if they don’t see it as very profitable they go elsewhere as in this case.
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quantAndHold
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Re: State Farm Stops Writing New Homeowners' Iinsuarnce Policies in Calif

Post by quantAndHold »

bombcar wrote: Sun May 28, 2023 12:57 am
quantAndHold wrote: Sat May 27, 2023 6:44 pm I realize you don’t know San Diego very well, but most of the red areas are either parkland, open space canyons, or military bases. The white areas are where most of the population is.
That's exactly the problem they faced the last time the big fires were down that area, the fires raced up those canyons and jumped freeways to get to other canyons, and threatened (or destroyed) houses above the canyons.

Insurance companies just can't handle mass casualty claims where an event affects some large percentage of their rate-payers. Building codes will have to update to be "more fire-proof" in designated areas (think slate roofs, metal fences, minimum setbacks, etc).

(As an aside looks like the houses I saw that had burned in the Cedar fire are finally rebuilt)
Yes, I was here for that. Those areas, and similar ones that are on the boundary of wild land, are all marked in red on that map. I realize most Bogleheads are suburban folk and don’t realize anyone else exists, but a lot of the population of San Diego actually lives in the areas that are not within half a block of a canyon.
SC Anteater
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Re: State Farm Stops Writing New Homeowners' Iinsuarnce Policies in Calif

Post by SC Anteater »

Weathering wrote: Sat May 27, 2023 12:44 pm
bgf wrote: Sat May 27, 2023 12:13 pm
Weathering wrote: Sat May 27, 2023 12:01 pm This was mentioned a few days ago within my neighborhood group. One neighbor was given the option to sign up with State Farm on that day only (policy could not be written the next day). It totally sounded like a high pressure sales tactic but it turned out to be true. The neighbor didn’t go with it and now is stuck with only CA Fair Plan as an option (about double the price of the State Farm quote at >$7,500/yr).

I’m hopeful that the state takes action to make home owners insurance affordable in the future. At least this wasn’t specific to a city because then the state wouldn’t get involved. Seems like there needs to be more state-wide issues with home owners insurance before something is done to make it better.

Many condo association in this So Cal city are having great difficulty getting insurance at all. This is resulting in big assessments to individual condo owners. Fortunately, I don’t have to worry about that but it will be another issue which could help get attention on the situation and a future solution.
What is the state supposed to do? Insurance is a pretty low barrier to entry industry, is low margin, and is fundamentally based on objective risk of loss and associated costs. At the end of the day, if the business prospects aren’t there, the businesses won’t underwrite the policies. As far as I’m aware, the state of California can’t regulate businesses that don’t operate in California.
I was thinking the state would require home owners to mitigate fire hazards and require cities to remove all sources of combustion (remove most trees, require gravel embankments on all streets rather than grasses, require annual vegetation removal on all open-space areas, mitigate any fire corridors). This would make California more visually like AZ, but since we are both desert climates it would make sense for CA to be more like AZ.

I know this would be an issue for native plants&animals. I don’t have a proposal on how to handle that other than to ring-fence the native areas with fire prevention zones.
CA's a pretty big state - it's certainly not all desert. Would you tell the citizens of say, Torrance, who have zero wildfire risk, to remove all their trees and only use gravel?
vested1
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Re: State Farm Stops Writing New Homeowners' Iinsuarnce Policies in Calif

Post by vested1 »

"And like a good neighbor, State Farm is...." Never mind.

I would imagine that other insurance companies are looking forward to additional premiums from homeowners who either can't get new HO policies from State Farm in California or who decide to cancel their existing policies in the most populous state in the country.

IMHO, It might be summed up by another commercial.

"We are Farmers, Dumb da Dumb Dumb, Dumb, Dumb, Dumb"
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yatesd
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Re: State Farm Stops Writing New Homeowners' Iinsuarnce Policies in Calif

Post by yatesd »

Stinky wrote: Sat May 27, 2023 3:50 pm
Weathering wrote: Sat May 27, 2023 3:28 pm I wish the state would say to insurance companies, “how can we make CA a place where you can offer insurance? What do we need to do?”
How about “Allow home insurers to set prices at a level that allows them to make a reasonable profit on their California business”.

Price controls on goods or services ultimately lead to shortages of supply. Home insurance is not an exception to that rule.

State Farm doesn’t hate California. But State Farm can’t continue to write business in a state where it (apparently) can’t make money.
+1, companies need to have the ability to make a profit or they have no reason or capability to exist
3PKWzh9
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Re: State Farm Stops Writing New Homeowners' Iinsuarnce Policies in Calif

Post by 3PKWzh9 »

vested1 wrote: Mon May 29, 2023 7:02 am "And like a good neighbor, State Farm is...." Never mind.

I would imagine that other insurance companies are looking forward to additional premiums from homeowners who either can't get new HO policies from State Farm in California or who decide to cancel their existing policies in the most populous state in the country.

IMHO, It might be summed up by another commercial.

"We are Farmers, Dumb da Dumb Dumb, Dumb, Dumb, Dumb"
There is only one factual reason State Farm referenced for its pull out from California, and that is rebuilding cost. [Unnecessary comment removed by moderator Kendall], the cost to rebuild a house in California is too high. Being too high, State Farm cannot pay out to rebuild houses against known peril levels, which haven’t changed all that much.

[Unnecessary comments removed by moderator Kendall.]

Actually pretty simple.
coachd50
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Re: State Farm Stops Writing New Homeowners' Iinsuarnce Policies in Calif

Post by coachd50 »

Stinky wrote: Sat May 27, 2023 3:50 pm
Weathering wrote: Sat May 27, 2023 3:28 pm I wish the state would say to insurance companies, “how can we make CA a place where you can offer insurance? What do we need to do?”
How about “Allow home insurers to set prices at a level that allows them to make a reasonable profit on their California business”.

Price controls on goods or services ultimately lead to shortages of supply. Home insurance is not an exception to that rule.

State Farm doesn’t hate California. But State Farm can’t continue to write business in a state where it (apparently) can’t make money.
That sounds good- and obviously it is a solid free market capitalistic plan. But I do think there are some deeper levels to it. For instance- my homeowners insurance in South Louisiana (similar issues with providers ceasing new business and even cancelling old policies) has now risen to 2.5% of my original home purchase price (2009) My 2023 premium is equivalent to 7 months of principal and interest from my original mortgage)
dougp29
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Re: State Farm Stops Writing New Homeowners' Iinsuarnce Policies in Calif

Post by dougp29 »

Farmers is still writing in California. However, my yearly premium for 2023-24 just renewed at $1740, 62% higher than last year's premium of $1081.
RetiredCSProf
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Re: State Farm Stops Writing New Homeowners' Iinsuarnce Policies in Calif

Post by RetiredCSProf »

I'm in CA and, two months ago, switched my homeowner's Insurance policy from Farmers to State Farm.

I switched away from Farmers because of a substantial increase in premium (although no claims processed in over 30 years with Farmers) and because Farmer's agents were non-responsive. At first, I tried switching to a different agent at Farmers, but it could not be processed because of some glitch in their system with ID numbers.

I chose to switch to State Farm because I saw many posts from BH that they were happy with this company. Not sure what to think now. Was I lucky to get a policy at State Farm before they stopped writing new policies? Or is there a risk the policy won't be renewed in a year? I'm not in a wildfire zone or a flood zone.
3PKWzh9
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Re: State Farm Stops Writing New Homeowners' Iinsuarnce Policies in Calif

Post by 3PKWzh9 »

coachd50 wrote: Mon May 29, 2023 8:28 am
3PKWzh9 wrote: Mon May 29, 2023 8:19 am
vested1 wrote: Mon May 29, 2023 7:02 am "And like a good neighbor, State Farm is...." Never mind.

I would imagine that other insurance companies are looking forward to additional premiums from homeowners who either can't get new HO policies from State Farm in California or who decide to cancel their existing policies in the most populous state in the country.

IMHO, It might be summed up by another commercial.

"We are Farmers, Dumb da Dumb Dumb, Dumb, Dumb, Dumb"
There is only one factual reason State Farm referenced for its pull out from California, and that is rebuilding cost. [Unnecessary comment removed by moderator Kendall], the cost to rebuild a house in California is too high. Being too high, State Farm cannot pay out to rebuild houses against known peril levels, which haven’t changed all that much.

[Unnecessary comments removed by moderator Kendall.]

Actually pretty simple.
Yeah… but it is happening in Louisiana too- which doesn’t have the issues you mentioned
Has State Farm stopped writing business in Louisiana? I have not seen that. Or have premia simply increased due to the latent nationwide inflation issue driving up build costs?
WillRetire
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Re: State Farm Stops Writing New Homeowners' Iinsuarnce Policies in Calif

Post by WillRetire »

3PKWzh9 wrote: Mon May 29, 2023 8:50 am
coachd50 wrote: Mon May 29, 2023 8:28 am
3PKWzh9 wrote: Mon May 29, 2023 8:19 am
vested1 wrote: Mon May 29, 2023 7:02 am "And like a good neighbor, State Farm is...." Never mind.

I would imagine that other insurance companies are looking forward to additional premiums from homeowners who either can't get new HO policies from State Farm in California or who decide to cancel their existing policies in the most populous state in the country.

IMHO, It might be summed up by another commercial.

"We are Farmers, Dumb da Dumb Dumb, Dumb, Dumb, Dumb"
There is only one factual reason State Farm referenced for its pull out from California, and that is rebuilding cost. [Unnecessary comment removed by moderator Kendall], the cost to rebuild a house in California is too high. Being too high, State Farm cannot pay out to rebuild houses against known peril levels, which haven’t changed all that much.

[Unnecessary comments removed by moderator Kendall.]

Actually pretty simple.
Yeah… but it is happening in Louisiana too- which doesn’t have the issues you mentioned
Has State Farm stopped writing business in Louisiana? I have not seen that. Or have premia simply increased due to the latent nationwide inflation issue driving up build costs?
Good point.

State Farm explains their decision on their website in the first paragraph. And in the 2nd paragraph, they offer another clue.
Bolding/underlining by me.
https://newsroom.statefarm.com/state-fa ... ss-update/
State Farm General Insurance Company®, State Farm’s provider of homeowners insurance in California, will cease accepting new applications including all business and personal lines property and casualty insurance, effective May 27, 2023. This decision does not impact personal auto insurance. 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.

We take seriously our responsibility to manage risk. We recognize the Governor’s administration, legislators, and the California Department of Insurance (CDI) for their wildfire loss mitigation efforts. We pledge to work constructively with the CDI and policymakers to help build market capacity in California. However, it’s necessary to take these actions now to improve the company’s financial strength. We will continue to evaluate our approach based on changing market conditions. State Farm® independent contractor agents licensed and authorized in California will continue to serve existing customers for these products and new customers for products not impacted by this decision.
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Re: State Farm Stops Writing New Homeowners' Iinsuarnce Policies in Calif

Post by coachd50 »

3PKWzh9 wrote: Mon May 29, 2023 8:50 am
coachd50 wrote: Mon May 29, 2023 8:28 am
3PKWzh9 wrote: Mon May 29, 2023 8:19 am
vested1 wrote: Mon May 29, 2023 7:02 am "And like a good neighbor, State Farm is...." Never mind.

I would imagine that other insurance companies are looking forward to additional premiums from homeowners who either can't get new HO policies from State Farm in California or who decide to cancel their existing policies in the most populous state in the country.

IMHO, It might be summed up by another commercial.

"We are Farmers, Dumb da Dumb Dumb, Dumb, Dumb, Dumb"
There is only one factual reason State Farm referenced for its pull out from California, and that is rebuilding cost. [Unnecessary comment removed by moderator Kendall], the cost to rebuild a house in California is too high. Being too high, State Farm cannot pay out to rebuild houses against known peril levels, which haven’t changed all that much.

[Unnecessary comment removed by moderator Kendall.]

Actually pretty simple.
Yeah… but it is happening in Louisiana too- which doesn’t have the issues you mentioned
Has State Farm stopped writing business in Louisiana? I have not seen that. Or have premia simply increased due to the latent nationwide inflation issue driving up build costs?
State farm is not writing new Home Owners insurance policies in Southern Louisiana. Possibly the entire state (unsure and didn’t want to post inaccuracies)
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Stinky
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Re: State Farm Stops Writing New Homeowners' Iinsuarnce Policies in Calif

Post by Stinky »

WillRetire wrote: Mon May 29, 2023 9:08 am We recognize the Governor’s administration, legislators, and the California Department of Insurance (CDI) for their wildfire loss mitigation efforts.
Yes, it’s nice for State Farm to thank its regulators for their positive actions. (It’s always a good idea to be publicly respectful of those who have significant control over your company).

However, I expect that State Farm is privately very disappointed at this business decision they had to make. It’s no small matter to walk away from writing new business in the largest state in the country, disappointing prospective policyholders and its own field force and home office support staff.

At the end of the day, State Farm needs to make a reasonable profit. And State Farm’s numbers folks don’t believe they can do that at the rates they’re allowed to charge in California.
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Kingghoti
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Re: State Farm Stops Writing New Homeowners' Iinsuarnce Policies in Calif

Post by Kingghoti »

Something I don’t quite get. Many assertions of the need to make a profit. Yes. How about the need to avoid losses? Insurance is one thing for which the price is fixed before the costs are known. Tough to be sure you can sell your products at X before you know cost of goods sold. And pricing is contractually and regulatorally fixed once set. Ooph. Not for the weak kneed.
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Re: State Farm Stops Writing New Homeowners' Iinsuarnce Policies in Calif

Post by afan »

Stinky wrote: Mon May 29, 2023 10:36 am
WillRetire wrote: Mon May 29, 2023 9:08 am We recognize the Governor’s administration, legislators, and the California Department of Insurance (CDI) for their wildfire loss mitigation efforts.
Yes, it’s nice for State Farm to thank its regulators for their positive actions. (It’s always a good idea to be publicly respectful of those who have significant control over your company).
I suspect SF is genuinely grateful for the mitigation efforts. Since the company is continuing existing policies in the state, there is a lot at stake for limiting fire losses.

SF could be sincerely grateful for those efforts, while wishing it could raise rates higher. Without those mitigation efforts, SF may have found it necessary to drop CA homeowners coverage altogether. That would have cost them the largest auto market.
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MCSquared
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Re: State Farm Stops Writing New Homeowners' Iinsuarnce Policies in Calif

Post by MCSquared »

Stinky wrote: Mon May 29, 2023 10:36 am
WillRetire wrote: Mon May 29, 2023 9:08 am We recognize the Governor’s administration, legislators, and the California Department of Insurance (CDI) for their wildfire loss mitigation efforts.
Yes, it’s nice for State Farm to thank its regulators for their positive actions. (It’s always a good idea to be publicly respectful of those who have significant control over your company).

However, I expect that State Farm is privately very disappointed at this business decision they had to make. It’s no small matter to walk away from writing new business in the largest state in the country, disappointing prospective policyholders and its own field force and home office support staff.

At the end of the day, State Farm needs to make a reasonable profit. And State Farm’s numbers folks don’t believe they can do that at the rates they’re allowed to charge in California.
Dropping/modifying coverage is nothing new for State Farm. Several years back, they made the decision to no longer offer coverage within the South Carolina coastal zone. Despite 30 years of coverage and zero claims, they would not renew. A few years later, they set up a subsidiary to offer coverage at much higher rates. Obviously the liability was limited to the subsidiary. Like a good neighbor.
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Re: State Farm Stops Writing New Homeowners' Iinsuarnce Policies in Calif

Post by CRC_Volunteer »

MCSquared wrote: Mon May 29, 2023 2:03 pm
Stinky wrote: Mon May 29, 2023 10:36 am
WillRetire wrote: Mon May 29, 2023 9:08 am We recognize the Governor’s administration, legislators, and the California Department of Insurance (CDI) for their wildfire loss mitigation efforts.
Yes, it’s nice for State Farm to thank its regulators for their positive actions. (It’s always a good idea to be publicly respectful of those who have significant control over your company).

However, I expect that State Farm is privately very disappointed at this business decision they had to make. It’s no small matter to walk away from writing new business in the largest state in the country, disappointing prospective policyholders and its own field force and home office support staff.

At the end of the day, State Farm needs to make a reasonable profit. And State Farm’s numbers folks don’t believe they can do that at the rates they’re allowed to charge in California.
Dropping/modifying coverage is nothing new for State Farm. Several years back, they made the decision to no longer offer coverage within the South Carolina coastal zone. Despite 30 years of coverage and zero claims, they would not renew. A few years later, they set up a subsidiary to offer coverage at much higher rates. Obviously the liability was limited to the subsidiary. Like a good neighbor.
SC Farm Bureau and others have done the same...
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Re: State Farm Stops Writing New Homeowners' Iinsuarnce Policies in Calif

Post by WillRetire »

afan wrote: Mon May 29, 2023 12:52 pm
Stinky wrote: Mon May 29, 2023 10:36 am
WillRetire wrote: Mon May 29, 2023 9:08 am We recognize the Governor’s administration, legislators, and the California Department of Insurance (CDI) for their wildfire loss mitigation efforts.
Yes, it’s nice for State Farm to thank its regulators for their positive actions. (It’s always a good idea to be publicly respectful of those who have significant control over your company).
I suspect SF is genuinely grateful for the mitigation efforts. Since the company is continuing existing policies in the state, there is a lot at stake for limiting fire losses.

SF could be sincerely grateful for those efforts, while wishing it could raise rates higher. Without those mitigation efforts, SF may have found it necessary to drop CA homeowners coverage altogether. That would have cost them the largest auto market.
Another possible reason for State Farm to mention the state's wildfire loss mitigation in the news release is to call attention to wildfires as a major risk that led to their decision to reduce their # of policies. That and construction costs were the 2 specific challenges mentioned in the statement. This was a major announcement and as such was probably carefully crafted and edited and approved at all levels. Every word is significant. California's economy & population is larger than many (most?) countries. It is more prudent to throw out some accolades & hints of continued "constructive" progress regarding wildfires, than pointedly stating: "wildfires are costing us a fortune & coverage is unsustainable".
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Re: State Farm Stops Writing New Homeowners' Iinsuarnce Policies in Calif

Post by talzara »

3PKWzh9 wrote: Mon May 29, 2023 8:50 am Has State Farm stopped writing business in Louisiana? I have not seen that. Or have premia simply increased due to the latent nationwide inflation issue driving up build costs?
coachd50 wrote: Mon May 29, 2023 9:17 am State farm is not writing new Home Owners insurance policies in Southern Louisiana. Possibly the entire state (unsure and didn’t want to post inaccuracies)
Louisiana is the next Florida. At least 9 homeowners insurers in Louisiana have gone bankrupt in the last three years.

State Farm has to be much more careful in Louisiana because the state is pooled with the rest of the country. State Farm operates non-pooled subsidiaries in Florida, California, and part of Texas, so it can allow the subsidiaries to go bankrupt and walk away to protect the other states. It can't do that in Louisiana. Losses in Louisiana are paid out of national reserves that might be needed in Maine.
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Re: State Farm Stops Writing New Homeowners' Iinsuarnce Policies in Calif

Post by Stinky »

talzara wrote: Mon May 29, 2023 3:46 pm
3PKWzh9 wrote: Mon May 29, 2023 8:50 am Has State Farm stopped writing business in Louisiana? I have not seen that. Or have premia simply increased due to the latent nationwide inflation issue driving up build costs?
coachd50 wrote: Mon May 29, 2023 9:17 am State farm is not writing new Home Owners insurance policies in Southern Louisiana. Possibly the entire state (unsure and didn’t want to post inaccuracies)
Louisiana is the next Florida. At least 9 homeowners insurers in Louisiana have gone bankrupt in the last three years.

State Farm has to be much more careful in Louisiana because the state is pooled with the rest of the country. State Farm operates non-pooled subsidiaries in Florida, California, and part of Texas, so it can allow the subsidiaries to go bankrupt and walk away to protect the other states. It can't do that in Louisiana. Losses in Louisiana are paid out of national reserves that might be needed in Maine.
One wonders if/when State Farm might set up a single state subsidiary in Louisiana.
Retired life insurance company financial executive who sincerely believes that ”It’s a GREAT day to be alive!”
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Re: State Farm Stops Writing New Homeowners' Iinsuarnce Policies in Calif

Post by tj »

Stinky wrote: Mon May 29, 2023 4:20 pm
talzara wrote: Mon May 29, 2023 3:46 pm
3PKWzh9 wrote: Mon May 29, 2023 8:50 am Has State Farm stopped writing business in Louisiana? I have not seen that. Or have premia simply increased due to the latent nationwide inflation issue driving up build costs?
coachd50 wrote: Mon May 29, 2023 9:17 am State farm is not writing new Home Owners insurance policies in Southern Louisiana. Possibly the entire state (unsure and didn’t want to post inaccuracies)
Louisiana is the next Florida. At least 9 homeowners insurers in Louisiana have gone bankrupt in the last three years.

State Farm has to be much more careful in Louisiana because the state is pooled with the rest of the country. State Farm operates non-pooled subsidiaries in Florida, California, and part of Texas, so it can allow the subsidiaries to go bankrupt and walk away to protect the other states. It can't do that in Louisiana. Losses in Louisiana are paid out of national reserves that might be needed in Maine.
One wonders if/when State Farm might set up a single state subsidiary in Louisiana.
I'm assuming Louisiana isn't large enough.
afan
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Re: State Farm Stops Writing New Homeowners' Iinsuarnce Policies in Calif

Post by afan »

I don't know how large the state has to be to make it worth having a separate company, as opposed to simply leaving. Stinky, any idea?



I have not heard this about California, but reports say that the Florida insurance market is a mess not only because of storm risk but also massive rampant fraud in the market for repairs. Anyone know whether that is an issue in LA as well?
We don't know how to beat the market on a risk-adjusted basis, and we don't know anyone that does know either | --Swedroe | We assume that markets are efficient, that prices are right | --Fama
TacoLover
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Re: State Farm Stops Writing New Homeowners' Iinsuarnce Policies in Calif

Post by TacoLover »

bgf wrote: Sat May 27, 2023 12:13 pm
Weathering wrote: Sat May 27, 2023 12:01 pm This was mentioned a few days ago within my neighborhood group. One neighbor was given the option to sign up with State Farm on that day only (policy could not be written the next day). It totally sounded like a high pressure sales tactic but it turned out to be true. The neighbor didn’t go with it and now is stuck with only CA Fair Plan as an option (about double the price of the State Farm quote at >$7,500/yr).

I’m hopeful that the state takes action to make home owners insurance affordable in the future. At least this wasn’t specific to a city because then the state wouldn’t get involved. Seems like there needs to be more state-wide issues with home owners insurance before something is done to make it better.

Many condo association in this So Cal city are having great difficulty getting insurance at all. This is resulting in big assessments to individual condo owners. Fortunately, I don’t have to worry about that but it will be another issue which could help get attention on the situation and a future solution.
What is the state supposed to do? Insurance is a pretty low barrier to entry industry, is low margin, and is fundamentally based on objective risk of loss and associated costs. At the end of the day, if the business prospects aren’t there, the businesses won’t underwrite the policies. As far as I’m aware, the state of California can’t regulate businesses that don’t operate in California.
Obviously, the state instead could make the best choice. Which is let Market forces decide. If one company charges too much, another will undercut them. [Off-topic comment removed by admin LadyGeek]
TacoLover
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Re: State Farm Stops Writing New Homeowners' Iinsuarnce Policies in Calif

Post by TacoLover »

Kingghoti wrote: Mon May 29, 2023 10:56 am Something I don’t quite get. Many assertions of the need to make a profit. Yes. How about the need to avoid losses? Insurance is one thing for which the price is fixed before the costs are known. Tough to be sure you can sell your products at X before you know cost of goods sold. And pricing is contractually and regulatorally fixed once set. Ooph. Not for the weak kneed.
The costs are not known for any given policy. But with a large enough denominator, the costs can be known to a reasonable degree. This is, I understand the whole purpose for actuaries. If they are covering one person’s house, they could have catastrophic loss. If they are covering 1 million peoples houses, they can predict to a very fine degree how much they will be paying out and, add five or 10% to that cost and divide it out and have a good understanding of what their profit will be.
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Re: State Farm Stops Writing New Homeowners' Iinsuarnce Policies in Calif

Post by coachd50 »

TacoLover wrote: Mon May 29, 2023 4:40 pm
bgf wrote: Sat May 27, 2023 12:13 pm
Weathering wrote: Sat May 27, 2023 12:01 pm This was mentioned a few days ago within my neighborhood group. One neighbor was given the option to sign up with State Farm on that day only (policy could not be written the next day). It totally sounded like a high pressure sales tactic but it turned out to be true. The neighbor didn’t go with it and now is stuck with only CA Fair Plan as an option (about double the price of the State Farm quote at >$7,500/yr).

I’m hopeful that the state takes action to make home owners insurance affordable in the future. At least this wasn’t specific to a city because then the state wouldn’t get involved. Seems like there needs to be more state-wide issues with home owners insurance before something is done to make it better.

Many condo association in this So Cal city are having great difficulty getting insurance at all. This is resulting in big assessments to individual condo owners. Fortunately, I don’t have to worry about that but it will be another issue which could help get attention on the situation and a future solution.
What is the state supposed to do? Insurance is a pretty low barrier to entry industry, is low margin, and is fundamentally based on objective risk of loss and associated costs. At the end of the day, if the business prospects aren’t there, the businesses won’t underwrite the policies. As far as I’m aware, the state of California can’t regulate businesses that don’t operate in California.
Obviously, the state instead could make the best choice. Which is let Market forces decide. If one company charges too much, another will undercut them. [Off-topic comment removed by admin LadyGeek]
As I said in another thread- that sounds OK in an academic economic discussion- but there are actual real human lives and consequences involved making it a bit deeper than just "market forces". Remember that "market forces" are not an instantaneous event. Real human lives are affected.
TacoLover
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Re: State Farm Stops Writing New Homeowners' Iinsuarnce Policies in Calif

Post by TacoLover »

JackoC wrote: Sun May 28, 2023 11:53 am
Stinky wrote: Sat May 27, 2023 3:50 pm
Weathering wrote: Sat May 27, 2023 3:28 pm I wish the state would say to insurance companies, “how can we make CA a place where you can offer insurance? What do we need to do?”
How about “Allow home insurers to set prices at a level that allows them to make a reasonable profit on their California business”.

Price controls on goods or services ultimately lead to shortages of supply. Home insurance is not an exception to that rule.
Yeah the simple 'what do we need to do?' is let the insurance companies would write policies in each area at prices that make them an attractive risk/return proposition for their profit seeking owners. Price controls are an enduring siren song in public policy but they are almost never the best solution with very few exceptions. If the state wants to spend public money for the particular benefit of people who've chosen to live/stay in high risk areas (not pointing fingers, risk could have changed, still either the person living there pays or somebody else does) it might be more efficient to spend that on mitigation like brush clearing or electric line safety etc. vs. spending it subsidizing high risk area insurance without reducing risk, or a system of price regulation that overcharges low risk areas to undercharge high risk ones (that's sustainable as long as the subsidizing customers will put up with it, but inefficient). But there's no real either/or between price controls and risk mitigation. Companies will stay if you don't try to force their owners to net subsidize the provision of their good/service and eventually leave or close down if you do.
As I recall in economics, price controls, reliably result in some combination of scarcity, black markets, and lower quality. It’s true for apple prices and True Form medicine and true for apartments. In this case, price control would lead to companies exiting the market to be left with lower quality companies. And worse policies. If you go to any major supermarket today, you will find lots of beautiful, right crispy apples. That is because they can make a profit. If you cap the price of apples the seller will no longer take care to make sure the best crunchiest apples are out there. He would keep those for him and his family. You would just find the old Brewster apples because it is not worth it to him for the minimal profit to put out the best items. or he would just not have apples. Maybe he would have pears. Same thing for all price control everywhere.
TacoLover
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Re: State Farm Stops Writing New Homeowners' Iinsuarnce Policies in Calif

Post by TacoLover »

Stinky wrote: Mon May 29, 2023 10:36 am
WillRetire wrote: Mon May 29, 2023 9:08 am We recognize the Governor’s administration, legislators, and the California Department of Insurance (CDI) for their wildfire loss mitigation efforts.
Yes, it’s nice for State Farm to thank its regulators for their positive actions. (It’s always a good idea to be publicly respectful of those who have significant control over your company).

However, I expect that State Farm is privately very disappointed at this business decision they had to make. It’s no small matter to walk away from writing new business in the largest state in the country, disappointing prospective policyholders and its own field force and home office support staff.

At the end of the day, State Farm needs to make a reasonable profit. And State Farm’s numbers folks don’t believe they can do that at the rates they’re allowed to charge in California.
State Farm can say whatever they like and they have lawyers and flacks not to screw up the statement. But they do not want to anger the people who regulate all of their business. So of course they are not going to say anything negative about the regulators. Because of course they would not. So they are going to put out some kind of BS that does not blame the regulators. if they are going to pay out X in claims, they need to be able to charge more than X in premium. If the California regulators will not allow them to charge more than X then it is adios and Vaya Con Dios. They can say that it is because of wildfires and building costs, but that is obviously half of the equation. The other half is the state will not allow them to charge enough to pay those costs. that’s the part they can’t say that loud but every thinking person recognizes it. It is not the costs that they have to pay. It is that they cannot charge enough to stay profitable and that is the job of the regulators, but they can’t say that out loud. It’s just that everybody knows this to be the truth.
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Re: State Farm Stops Writing New Homeowners' Iinsuarnce Policies in Calif

Post by greenback »

vested1 wrote: Mon May 29, 2023 7:02 am "And like a good neighbor, State Farm is...." Never mind.

I would imagine that other insurance companies are looking forward to additional premiums from homeowners who either can't get new HO policies from State Farm in California or who decide to cancel their existing policies in the most populous state in the country.

IMHO, It might be summed up by another commercial.

"We are Farmers, Dumb da Dumb Dumb, Dumb, Dumb, Dumb"
To my understanding this is part of the problem. CA Prop 103 doesn't allow insurance companies to take rate without Department of Insurance approval. Meaning, insurance companies cannot increase their premiums to match their increased exposure without DOI approval.

So if i stand to lose $100, but can only legally charge you $85, it makes no sense to stay in the state. Other companies are limited similarly. So now you will have more people in the market looking for coverage, and companies not willing to insure them because of the max they can charge.
You shouldn’t retire until your money starts making more money than you made in your best year.
TacoLover
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Re: State Farm Stops Writing New Homeowners' Iinsuarnce Policies in Calif

Post by TacoLover »

coachd50 wrote: Mon May 29, 2023 4:47 pm
TacoLover wrote: Mon May 29, 2023 4:40 pm
bgf wrote: Sat May 27, 2023 12:13 pm
Weathering wrote: Sat May 27, 2023 12:01 pm This was mentioned a few days ago within my neighborhood group. One neighbor was given the option to sign up with State Farm on that day only (policy could not be written the next day). It totally sounded like a high pressure sales tactic but it turned out to be true. The neighbor didn’t go with it and now is stuck with only CA Fair Plan as an option (about double the price of the State Farm quote at >$7,500/yr).

I’m hopeful that the state takes action to make home owners insurance affordable in the future. At least this wasn’t specific to a city because then the state wouldn’t get involved. Seems like there needs to be more state-wide issues with home owners insurance before something is done to make it better.

Many condo association in this So Cal city are having great difficulty getting insurance at all. This is resulting in big assessments to individual condo owners. Fortunately, I don’t have to worry about that but it will be another issue which could help get attention on the situation and a future solution.
What is the state supposed to do? Insurance is a pretty low barrier to entry industry, is low margin, and is fundamentally based on objective risk of loss and associated costs. At the end of the day, if the business prospects aren’t there, the businesses won’t underwrite the policies. As far as I’m aware, the state of California can’t regulate businesses that don’t operate in California.
Obviously, the state instead could make the best choice. Which is let Market forces decide. If one company charges too much, another will undercut them. [Off-topic comment removed by admin LadyGeek]
As I said in another thread- that sounds OK in an academic economic discussion- but there are actual real human lives and consequences involved making it a bit deeper than just "market forces". Remember that "market forces" are not an instantaneous event. Real human lives are affected.
The question of human impact is immaterial. It really matters zero. If market forces mean that the company cannot stay in business, then the company cannot stay in business. So instead of having the option for an expensive policy, you have no option to purchase a policy at all. This is what always happens when, the state intervenes and Directs the market. You can see the cost of milk is too high. So let’s cat milk at $.25 a gallon. That’s great. All the citizens will be helped. Except the milk manufacturers cannot make milk at that price. So either they will divert all of their milk outside of California or they will just declare bankruptcy, and now there is no milk. I was just talking with a friend on a bike ride earlier today. It’s not that we expect the government to be filled with intelligent people. We just expect them not to make the dumbest decisions every time. Because we are the ones who suffer. It’s almost like they literally cannot see the consequences of their decisions. It’s the same for rent control. The same for milk. The same for setting rates on insurance policies. The market is reality. You can ignore reality but you cannot ignore the consequences of reality.
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Re: State Farm Stops Writing New Homeowners' Iinsuarnce Policies in Calif

Post by TacoLover »

greenback wrote: Mon May 29, 2023 5:00 pm
vested1 wrote: Mon May 29, 2023 7:02 am "And like a good neighbor, State Farm is...." Never mind.

I would imagine that other insurance companies are looking forward to additional premiums from homeowners who either can't get new HO policies from State Farm in California or who decide to cancel their existing policies in the most populous state in the country.

IMHO, It might be summed up by another commercial.

"We are Farmers, Dumb da Dumb Dumb, Dumb, Dumb, Dumb"
To my understanding this is part of the problem. CA Prop 103 doesn't allow insurance companies to take rate without Department of Insurance approval. Meaning, insurance companies cannot increase their premiums to match their increased exposure without DOI approval.

So if i stand to lose $100, but can only legally charge you $85, it makes no sense to stay in the state. Other companies are limited similarly. So now you will have more people in the market looking for coverage, and companies not willing to insure them because of the max they can charge.
Totally. It is just a question of dollars and cents. In other words market forces. Someone said you can’t think of it as market forces. You have to consider the people. This was not the decision of State Farm or any other insurance company. Like you said if the policy costs $100 and they can only charge $85, there won’t be any policies. Or there will be policies until the company is bankrupt and then there will be no policies. The decision for State Farm to leave was realistically made by the state of California telling them they cannot charge enough to cover their losses. Not by state farm.
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Re: State Farm Stops Writing New Homeowners' Iinsuarnce Policies in Calif

Post by Big Dog »

TacoLover wrote: Mon May 29, 2023 5:07 pm
greenback wrote: Mon May 29, 2023 5:00 pm
vested1 wrote: Mon May 29, 2023 7:02 am "And like a good neighbor, State Farm is...." Never mind.

I would imagine that other insurance companies are looking forward to additional premiums from homeowners who either can't get new HO policies from State Farm in California or who decide to cancel their existing policies in the most populous state in the country.

IMHO, It might be summed up by another commercial.

"We are Farmers, Dumb da Dumb Dumb, Dumb, Dumb, Dumb"
To my understanding this is part of the problem. CA Prop 103 doesn't allow insurance companies to take rate without Department of Insurance approval. Meaning, insurance companies cannot increase their premiums to match their increased exposure without DOI approval.

So if i stand to lose $100, but can only legally charge you $85, it makes no sense to stay in the state. Other companies are limited similarly. So now you will have more people in the market looking for coverage, and companies not willing to insure them because of the max they can charge.
Totally. It is just a question of dollars and cents. In other words market forces. Someone said you can’t think of it as market forces. You have to consider the people. This was not the decision of State Farm or any other insurance company. Like you said if the policy costs $100 and they can only charge $85, there won’t be any policies. Or there will be policies until the company is bankrupt and then there will be no policies. The decision for State Farm to leave was realistically made by the state of California telling them they cannot charge enough to cover their losses. Not by state farm.
Of course, if the people who live in a high fire area (or flood zone) can't afford the insurance, they can always move to a lower risk/cost area. (Yeah, I get Prop 13 and all, but insurance is just part of the Total Cost of home ownership, as are property taxes.)
Last edited by Big Dog on Mon May 29, 2023 5:20 pm, edited 2 times in total.
TacoLover
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Re: State Farm Stops Writing New Homeowners' Iinsuarnce Policies in Calif

Post by TacoLover »

Big Dog wrote: Mon May 29, 2023 5:10 pm
TacoLover wrote: Mon May 29, 2023 5:07 pm
greenback wrote: Mon May 29, 2023 5:00 pm
vested1 wrote: Mon May 29, 2023 7:02 am "And like a good neighbor, State Farm is...." Never mind.

I would imagine that other insurance companies are looking forward to additional premiums from homeowners who either can't get new HO policies from State Farm in California or who decide to cancel their existing policies in the most populous state in the country.

IMHO, It might be summed up by another commercial.

"We are Farmers, Dumb da Dumb Dumb, Dumb, Dumb, Dumb"
To my understanding this is part of the problem. CA Prop 103 doesn't allow insurance companies to take rate without Department of Insurance approval. Meaning, insurance companies cannot increase their premiums to match their increased exposure without DOI approval.

So if i stand to lose $100, but can only legally charge you $85, it makes no sense to stay in the state. Other companies are limited similarly. So now you will have more people in the market looking for coverage, and companies not willing to insure them because of the max they can charge.
Totally. It is just a question of dollars and cents. In other words market forces. Someone said you can’t think of it as market forces. You have to consider the people. This was not the decision of State Farm or any other insurance company. Like you said if the policy costs $100 and they can only charge $85, there won’t be any policies. Or there will be policies until the company is bankrupt and then there will be no policies. The decision for State Farm to leave was realistically made by the state of California telling them they cannot charge enough to cover their losses. Not by state farm.
Of course, if the people who live in a high fire are (or flood zone) can't afford the insurance, they always move to a lower risk/cost area. (Yeah, I get Prop 13 and all, but insurance is just part of the Total Cost of home ownership, as are property taxes.)
Market forces baby. Insurance should not charge the same premium for an 80-year-old man who smokes two packs a day as compared to an Olympic swimmer. They should not charge the same for someone in a high risk fire area as compared to a low risk area. And if the state mandates that everyone has to pay the same, they are not going to lower the high cost policies to the lower cost policies. They are going to force the people who make more prudent decisions to pay for the people who make less prudent decisions. The consequences of economic policies, I think are generally easy to predict. Ask yourself what would you do in this situation? it’s just that politicians seem to have no understanding whatsoever of economics or of consequences. They make decisions that sound. Pretty men are surprised when everything falls apart. When the first grader could have predicted the obvious consequences.
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Re: State Farm Stops Writing New Homeowners' Insurance Policies in Calif

Post by LadyGeek »

The discussion is getting derailed on economic policy (and taking a stab at CA politicians). Please stay on-topic.

To keep this actionable, how will this impact your approach to obtain homeowner's insurance in CA?


I also fixed a typo in the thread title - "Iinsuarnce" to "Insurance".
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Re: State Farm Stops Writing New Homeowners' Iinsuarnce Policies in Calif

Post by simas »

TacoLover wrote: Mon May 29, 2023 4:58 pm
Stinky wrote: Mon May 29, 2023 10:36 am
WillRetire wrote: Mon May 29, 2023 9:08 am We recognize the Governor’s administration, legislators, and the California Department of Insurance (CDI) for their wildfire loss mitigation efforts.
Yes, it’s nice for State Farm to thank its regulators for their positive actions. (It’s always a good idea to be publicly respectful of those who have significant control over your company).

However, I expect that State Farm is privately very disappointed at this business decision they had to make. It’s no small matter to walk away from writing new business in the largest state in the country, disappointing prospective policyholders and its own field force and home office support staff.

At the end of the day, State Farm needs to make a reasonable profit. And State Farm’s numbers folks don’t believe they can do that at the rates they’re allowed to charge in California.
State Farm can say whatever they like and they have lawyers and flacks not to screw up the statement. But they do not want to anger the people who regulate all of their business. So of course they are not going to say anything negative about the regulators. Because of course they would not. So they are going to put out some kind of BS that does not blame the regulators. if they are going to pay out X in claims, they need to be able to charge more than X in premium. If the California regulators will not allow them to charge more than X then it is adios and Vaya Con Dios. They can say that it is because of wildfires and building costs, but that is obviously half of the equation. The other half is the state will not allow them to charge enough to pay those costs. that’s the part they can’t say that loud but every thinking person recognizes it. It is not the costs that they have to pay. It is that they cannot charge enough to stay profitable and that is the job of the regulators, but they can’t say that out loud. It’s just that everybody knows this to be the truth.
insurance is VERY heavily regulated and is all about math
- there is a concept of loss ratio which is essentially costs of the claims vs premium written. could be costs to defend (think lawyers and expert witnesses), costs to settle the claim, and other direct claim expenses
- there is cost of actually running the business , you know paying rent to a office building landlord somewhere, paying salary of people who are underwriting the insurance/issuing policies, paying IT, paying whole bunch of things including paying taxes.
Insurance companies show actuaries and actuaries within regulator bodies of each date the book of business, all costs, all expenses, etc. and model for sustainability that then translates into rate fillings. Because State is on the hook should company fail, State has vested interest in keeping insurance business viable. If any State gets stupid and wants to make business that is not impossible to keep companies viable, they die , leave, or both.
- next time you see the news of 'big verdict so and so get these extra millions from "compassionate jury" for ridiculous claim" , understand that it is YOUR rates that are going up due to above. It will be baked in and will be above all over inflation..
Kingghoti
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Re: State Farm Stops Writing New Homeowners' Iinsuarnce Policies in Calif

Post by Kingghoti »

TacoLover wrote: Mon May 29, 2023 4:44 pm
Kingghoti wrote: Mon May 29, 2023 10:56 am Something I don’t quite get. Many assertions of the need to make a profit. Yes. How about the need to avoid losses? Insurance is one thing for which the price is fixed before the costs are known. Tough to be sure you can sell your products at X before you know cost of goods sold. And pricing is contractually and regulatorally fixed once set. Ooph. Not for the weak kneed.
The costs are not known for any given policy. But with a large enough denominator, the costs can be known to a reasonable degree. This is, I understand the whole purpose for actuaries. If they are covering one person’s house, they could have catastrophic loss. If they are covering 1 million peoples houses, they can predict to a very fine degree how much they will be paying out and, add five or 10% to that cost and divide it out and have a good understanding of what their profit will be.
Of course. My thoughts were around the entire pool. Inasmuch as the upside is limited by price regulations but the downside is where the company is on its own, only backstopped by reinsurance. Good explanation in your post of how pooled risk works. Thanks. 😄
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Re: State Farm Stops Writing New Homeowners' Insurance Policies in Calif

Post by RetiredAL »

"To keep this actionable, how will this impact your approach to obtain homeowner's insurance in CA?"

I personally am in a pickle. I just took title of my late parents mountain home. I has been insured for 50 years by USAA.

Just before I changed the title, I confirmed with USAA that I could keep the insurance with them. When I went to change the insurance last week, USAA told me they are no longer writing new policies in CA. OK, my next choice would have been State Farm, but they stopped as the end of last week too. So, who's left?

Come tomorrow, I talk with an independent agent as to my options. Anyone that knows of a major insurer who is writing CA insurance, please left me know. At this point, cost is much less important that securing proper insurance

In the meantime, USAA did accept this month's payment that covers both locations. But I feel this leaves me insured by just a thread. The house had been titled 'Dad Trust Me Trustee' for the last 8 years, and the new title is 'Me/DW Trust with Me and DW Trustees', so technically my name was on the title before, but not as the Granter.

As a reference, since some posters think all CA is charged the same rate, the mountain home is 75% of Dad's Stockton home yet the mountain insurance policy cost is 2.5X what was paid for the Stockton home. The mountain home has been more expensive for years, so there is definitely a risk premium assigned to it.

I'm not here to quibble about why CA insurance is the way it is, I just need insurance.
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Re: State Farm Stops Writing New Homeowners' Iinsuarnce Policies in Calif

Post by TacoLover »

Kingghoti wrote: Mon May 29, 2023 8:04 pm
TacoLover wrote: Mon May 29, 2023 4:44 pm
Kingghoti wrote: Mon May 29, 2023 10:56 am Something I don’t quite get. Many assertions of the need to make a profit. Yes. How about the need to avoid losses? Insurance is one thing for which the price is fixed before the costs are known. Tough to be sure you can sell your products at X before you know cost of goods sold. And pricing is contractually and regulatorally fixed once set. Ooph. Not for the weak kneed.
The costs are not known for any given policy. But with a large enough denominator, the costs can be known to a reasonable degree. This is, I understand the whole purpose for actuaries. If they are covering one person’s house, they could have catastrophic loss. If they are covering 1 million peoples houses, they can predict to a very fine degree how much they will be paying out and, add five or 10% to that cost and divide it out and have a good understanding of what their profit will be.
Of course. My thoughts were around the entire pool. Inasmuch as the upside is limited by price regulations but the downside is where the company is on its own, only backstopped by reinsurance. Good explanation in your post of how pooled risk works. Thanks. 😄
Kingfish?

I remember reading about how difficult it must be for foreigners to learn English if they are not born into it and the example was what does "Ghoti" spell? Fish!
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Re: State Farm Stops Writing New Homeowners' Insurance Policies in Calif

Post by TacoLover »

RetiredAL wrote: Mon May 29, 2023 9:03 pm "To keep this actionable, how will this impact your approach to obtain homeowner's insurance in CA?"

I personally am in a pickle. I just took title of my late parents mountain home. I has been insured for 50 years by USAA.

Just before I changed the title, I confirmed with USAA that I could keep the insurance with them. When I went to change the insurance last week, USAA told me they are no longer writing new policies in CA. OK, my next choice would have been State Farm, but they stopped as the end of last week too. So, who's left?

Come tomorrow, I talk with an independent agent as to my options. Anyone that knows of a major insurer who is writing CA insurance, please left me know. At this point, cost is much less important that securing proper insurance

In the meantime, USAA did accept this month's payment that covers both locations. But I feel this leaves me insured by just a thread. The house had been titled 'Dad Trust Me Trustee' for the last 8 years, and the new title is 'Me/DW Trust with Me and DW Trustees', so technically my name was on the title before, but not as the Granter.

As a reference, since some posters think all CA is charged the same rate, the mountain home is 75% of Dad's Stockton home yet the mountain insurance policy cost is 2.5X what was paid for the Stockton home. The mountain home has been more expensive for years, so there is definitely a risk premium assigned to it.

I'm not here to quibble about why CA insurance is the way it is, I just need insurance.
Oh no I didn't mean to imply that for HO insurance. There was a movement - I don't recall details - that insurance cannot discriminate I think based on gender which is absurd. The insurance company must be able to evaluate large pools of insurees and make policies that reflect appropriate risk. That is what insurance is. If insurance cannot discriminate between high risk and low risk pools, well everyone will pay the high risk price and the low risk people will transfer their assets to the high risk people.
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Re: State Farm Stops Writing New Homeowners' Iinsuarnce Policies in Calif

Post by TacoLover »

simas wrote: Mon May 29, 2023 7:38 pm
TacoLover wrote: Mon May 29, 2023 4:58 pm
Stinky wrote: Mon May 29, 2023 10:36 am
WillRetire wrote: Mon May 29, 2023 9:08 am We recognize the Governor’s administration, legislators, and the California Department of Insurance (CDI) for their wildfire loss mitigation efforts.
Yes, it’s nice for State Farm to thank its regulators for their positive actions. (It’s always a good idea to be publicly respectful of those who have significant control over your company).

However, I expect that State Farm is privately very disappointed at this business decision they had to make. It’s no small matter to walk away from writing new business in the largest state in the country, disappointing prospective policyholders and its own field force and home office support staff.

At the end of the day, State Farm needs to make a reasonable profit. And State Farm’s numbers folks don’t believe they can do that at the rates they’re allowed to charge in California.
State Farm can say whatever they like and they have lawyers and flacks not to screw up the statement. But they do not want to anger the people who regulate all of their business. So of course they are not going to say anything negative about the regulators. Because of course they would not. So they are going to put out some kind of BS that does not blame the regulators. if they are going to pay out X in claims, they need to be able to charge more than X in premium. If the California regulators will not allow them to charge more than X then it is adios and Vaya Con Dios. They can say that it is because of wildfires and building costs, but that is obviously half of the equation. The other half is the state will not allow them to charge enough to pay those costs. that’s the part they can’t say that loud but every thinking person recognizes it. It is not the costs that they have to pay. It is that they cannot charge enough to stay profitable and that is the job of the regulators, but they can’t say that out loud. It’s just that everybody knows this to be the truth.
insurance is VERY heavily regulated and is all about math
- there is a concept of loss ratio which is essentially costs of the claims vs premium written. could be costs to defend (think lawyers and expert witnesses), costs to settle the claim, and other direct claim expenses
- there is cost of actually running the business , you know paying rent to a office building landlord somewhere, paying salary of people who are underwriting the insurance/issuing policies, paying IT, paying whole bunch of things including paying taxes.
Insurance companies show actuaries and actuaries within regulator bodies of each date the book of business, all costs, all expenses, etc. and model for sustainability that then translates into rate fillings. Because State is on the hook should company fail, State has vested interest in keeping insurance business viable. If any State gets stupid and wants to make business that is not impossible to keep companies viable, they die , leave, or both.
- next time you see the news of 'big verdict so and so get these extra millions from "compassionate jury" for ridiculous claim" , understand that it is YOUR rates that are going up due to above. It will be baked in and will be above all over inflation..
Agree. That was my point. Insurance works following two principles: a) there is a risk of an event happening that will be financially catastrophic to you (eg house burns down). b) Among large groups of people you can estimate to a great degree how many houses will burn down and how much it will cost to replace it (eg if you are insuring all Americans, you can calculate how many houses in USA burn down annually and how much it costs to replace those houses. Add in overhead. You should have a very good idea of how much your expenses will be. Add a reasonable profit, divide by the denominator, and you have your premium.)

Therefore as long as the companies are allowed to follow the free market, you pay a small fee to do away with catastrophic risk, and the insurance company makes enough money to pay out claims and make a reasonable profit.

[Political comment removed. Moderator Pops1860]
tj
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Re: State Farm Stops Writing New Homeowners' Insurance Policies in Calif

Post by tj »

RetiredAL wrote: Mon May 29, 2023 9:03 pm "To keep this actionable, how will this impact your approach to obtain homeowner's insurance in CA?"

I personally am in a pickle. I just took title of my late parents mountain home. I has been insured for 50 years by USAA.

Just before I changed the title, I confirmed with USAA that I could keep the insurance with them. When I went to change the insurance last week, USAA told me they are no longer writing new policies in CA. OK, my next choice would have been State Farm, but they stopped as the end of last week too. So, who's left?
The other insurers in the top 10 of the market share for HO policies in CA would be Farmers, Allstate, Liberty Mutual, AAA (CSAA for NorCal, and Auto Club Enterprises for SoCal), Mercury, Travelers, Nationwide.
Rex66
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Re: State Farm Stops Writing New Homeowners' Insurance Policies in Calif

Post by Rex66 »

California does have a legit strategy about raising rates. They have been basing this on previous costs. SF (and others) want California to change the formula and incorporate reasons why they believe losses will go up. Maybe they are right but it isn’t known.
Big Dog
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Re: State Farm Stops Writing New Homeowners' Insurance Policies in Calif

Post by Big Dog »

RetiredAL wrote: Mon May 29, 2023 9:03 pm "To keep this actionable, how will this impact your approach to obtain homeowner's insurance in CA?"

I personally am in a pickle. I just took title of my late parents mountain home. I has been insured for 50 years by USAA.

Just before I changed the title, I confirmed with USAA that I could keep the insurance with them. When I went to change the insurance last week, USAA told me they are no longer writing new policies in CA. OK, my next choice would have been State Farm, but they stopped as the end of last week too. So, who's left?

Come tomorrow, I talk with an independent agent as to my options. Anyone that knows of a major insurer who is writing CA insurance, please left me know. At this point, cost is much less important that securing proper insurance

In the meantime, USAA did accept this month's payment that covers both locations. But I feel this leaves me insured by just a thread. The house had been titled 'Dad Trust Me Trustee' for the last 8 years, and the new title is 'Me/DW Trust with Me and DW Trustees', so technically my name was on the title before, but not as the Granter.

As a reference, since some posters think all CA is charged the same rate, the mountain home is 75% of Dad's Stockton home yet the mountain insurance policy cost is 2.5X what was paid for the Stockton home. The mountain home has been more expensive for years, so there is definitely a risk premium assigned to it.

I'm not here to quibble about why CA insurance is the way it is, I just need insurance.
sorry to hear that USAA woudl not continue. But if you have a short deadline, you can always enroll in the state FAIR plan while you shop for alternatives. The FAIR plan is expensive, but at least you'll have coverage. You can always drop it for a refund of un-used premiums if you find a better deal elsewhere.

https://www.cfpnet.com
RetiredAL
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Re: State Farm Stops Writing New Homeowners' Insurance Policies in Calif

Post by RetiredAL »

tj wrote: Mon May 29, 2023 9:46 pm
RetiredAL wrote: Mon May 29, 2023 9:03 pm "To keep this actionable, how will this impact your approach to obtain homeowner's insurance in CA?"

I personally am in a pickle. I just took title of my late parents mountain home. I has been insured for 50 years by USAA.

Just before I changed the title, I confirmed with USAA that I could keep the insurance with them. When I went to change the insurance last week, USAA told me they are no longer writing new policies in CA. OK, my next choice would have been State Farm, but they stopped as the end of last week too. So, who's left?
The other insurers in the top 10 of the market share for HO policies in CA would be Farmers, Allstate, Liberty Mutual, AAA (CSAA for NorCal, and Auto Club Enterprises for SoCal), Mercury, Travelers, Nationwide.
Thank you for the list. Several years back, CSAA NON-RENEWED anyone that lived in an elevated fire risk area. Someone said Allstate stopped issuing earlier this year.
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Shackleton
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Re: State Farm Stops Writing New Homeowners' Iinsuarnce Policies in Calif

Post by Shackleton »

Weathering wrote: Sat May 27, 2023 3:28 pm
quantAndHold wrote: Sat May 27, 2023 2:55 pm
Weathering wrote: Sat May 27, 2023 12:01 pm I’m hopeful that the state takes action to make home owners insurance affordable in the future. At least this wasn’t specific to a city because then the state wouldn’t get involved. Seems like there needs to be more state-wide issues with home owners insurance before something is done to make it better.
When I bought my place in San Diego in 1997, I intentionally chose a place with low wildfire, earthquake, and flood risk. As a result, my homeowners insurance is still $1600. Are you really suggesting that I should subsidize the poor choices of people who didn’t do that?
To be clear, I’m suggesting the state require or encourage fire mitigation, not subsidize anything.
For example, my home owners association has 1700 acres of native coastal scrub. This never gets touched and gets thicker every year. It was a selling point 18 years ago, but now means the entire development is red on insurance maps.

I wish the state would say to insurance companies, “how can we make CA a place where you can offer insurance? What do we need to do?” Then a set of regulations would be drawn up, just like CEQA guidelines for environmental issues, and because of this CA becomes a state with better fire prevention along with a healthy home owners insurance market. But in the case of my HOA, I expect it would mean at least 100’ of native coastal scrub would need to be removed along all the roadways and homes in the neighborhood. It might even require us to pave a road to the center of the vegetation, along with a fire hydrant, for fire department access. This would cause an uproar well beyond my neighborhood and under current law it would result in very large fines. Some balance between people and nature needs to be achieved in a way that both can survive.

I have heard of some insurance companies requiring my neighbors to cut down trees near their homes and replace sections of wooden fences with non-combustible material fencing where they attach to their homes.It seems to happen in a rush and the homeowner pays a high price to get it done within two weeks or else be dropped from insurance. More guidelines like this, known in advance, could make it better for both insurers and homeowners. Rather than have the insurers do this on their own, I’m suggesting the state partner with the insurance companies on creating, allowing, and encouraging or requiring some guidelines.

One more example, I got a quote for fire-safe attic vents a few years ago. They would reduce the chance of fire embers getting through my attic vents and igniting my home. I didn’t move forward with the project because the city permit to replace my four attic vents was $1,200. The attic vents were $2,500 including installation but I could get 60% refunded by my county. The city should have figured out a way to offer discounted permits for fire safety measures (e.g., pictures instead of site visits to lower their costs). The result was no one in my neighborhood had their attic vents replaced with the fire-safe version.
It isn’t about the trees, it’s about the insurance companies’ ability (or rather inability) to fairly price policies based on the risk assessments done by the insurance company’s rating department. The CA State Insurance board, which must approve all rate changes, is not allowing State Farm and other states to do that, at least State Farm doesn’t think so. So they are choosing not to participate in HO insurance market in CA. I’m sure they are well aware that they will lose a lot of additional insurance policies (auto, boat, motorcycle, umbrella) due to people preferring to bundle and they feel that those policies are an acceptable loss and they will still end up in a better position without the HO and bundled policies.

But the other reality is that CA will be left with only smaller HO insurance companies which may not offer great bundling options. And these small companies are often the first to go bankrupt when a major event happens and they are overwhelmed by claims.
Last edited by Shackleton on Tue May 30, 2023 9:01 am, edited 1 time in total.
“Superhuman effort isn't worth a damn unless it achieves results.” ~Ernest Shackleton
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goingup
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Re: State Farm Stops Writing New Homeowners' Insurance Policies in Calif

Post by goingup »

I'll provide another CA insurance data point. Our USAA homeowners insurance has stayed remarkably low for 27 years. We're on the Central Coast. Inland dwellers in the same county who own large parcels are getting notices of nonrenewal, however.
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plutoblackhole
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Re: State Farm Stops Writing New Homeowners' Insurance Policies in Calif

Post by plutoblackhole »

RetiredAL wrote: Mon May 29, 2023 10:08 pm
tj wrote: Mon May 29, 2023 9:46 pm
RetiredAL wrote: Mon May 29, 2023 9:03 pm "To keep this actionable, how will this impact your approach to obtain homeowner's insurance in CA?"

I personally am in a pickle. I just took title of my late parents mountain home. I has been insured for 50 years by USAA.

Just before I changed the title, I confirmed with USAA that I could keep the insurance with them. When I went to change the insurance last week, USAA told me they are no longer writing new policies in CA. OK, my next choice would have been State Farm, but they stopped as the end of last week too. So, who's left?
The other insurers in the top 10 of the market share for HO policies in CA would be Farmers, Allstate, Liberty Mutual, AAA (CSAA for NorCal, and Auto Club Enterprises for SoCal), Mercury, Travelers, Nationwide.
Thank you for the list. Several years back, CSAA NON-RENEWED anyone that lived in an elevated fire risk area. Someone said Allstate stopped issuing earlier this year.
I shopped insurance late last year. I'm in one of the "non-insurable" zip codes, and Mercury was the only one that would write a policy. This is even just for a HO-2 policy (water damage, liability, etc, excluding fire), since I already have FairPlan. Mercury was pretty cheap compared to Farmers.
michaeljc70
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Re: State Farm Stops Writing New Homeowners' Iinsuarnce Policies in Calif

Post by michaeljc70 »

celia wrote: Sat May 27, 2023 1:49 pm
theron wrote: Sat May 27, 2023 12:47 pm
afan wrote: Sat May 27, 2023 12:38 pm At some point, insurance companies have to make a profit.
Thanks for my morning laugh.

Who would ever invest in a company that can’t make a profit?


Or would you like this to turn into another government agency and have all the state residents be taxed to cover the shortfalls?

Or would you like to let the payouts be less than the cost of the losses? (Think of the state’s California Earthquake Authority in it’s earliest years when you were warned that the fund might not be able to cover all claims when needed? Thus the participants might have a surcharge after a (financially) disastrous earthquake?)
At one time when I had State Farm insurance, State Farm (or at least part of it) was a mutual company owned by the policyholders so any "profit" would be coming out of their own pockets. If they had excess "profit" they would cut the policyholders a check.
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