BUSINESS + ECONOMY

State Farm Insurance pulls out of California because of catastrophes and increasing costs

May 30, 2023, 6:00 PM

State Farm stops home insurance sales in California...

The Bald Mountain Wildfire burns in the Grande Prairie Forest Area on May 12. (Government of Alberta Fire Service/Canadian Press/AP)

(Government of Alberta Fire Service/Canadian Press/AP)

SALT LAKE CITY — Citing the “historic” increase in construction costs and catastrophes such as wildfires, State Farm Insurance said Friday it has stopped accepting new homeowner insurance applications in California.

“It’s necessary to take these actions now to improve the company’s financial strength,” said State Farm as reported by  NPR.

“There are homes in Utah — homeowners in Utah that are looking at having the possibility of their insurance — their homeowners’ insurance yanked at renewal,” Debbie Dujanovic said.

Welcome to the show

Utah Insurance Commissioner Jon Pike also joins the other half of Dave & Dujanovic — Dave Noriega — to talk about this new development.

“I’ve been told by several [people] that there are some examples of companies who are either raising the premiums . . . or in one case I’m aware of, one company I won’t name at this point who is not going to renew homeowners policies if they are in what is determined to be a high wildfire-risk area,” Pike said.

“Here in Utah, we could be a risk for flooding, for earthquakes, for tornadoes, for a million different things — for fire, obviously, right?” Dave said. “If they just are going to ensure the safest of the safest of the safe, then most of us along the Wasatch Front, we could get dropped because all of us are at risk on some level.”

Insurance and fraud

Dave mentioned last year’s Hurricane Ian, a powerful Category 5 Atlantic hurricane, which was the third-costliest weather disaster on record, the deadliest hurricane to strike the state of Florida since the 1935 Labor Day hurricane and the strongest hurricane to make landfall in Florida since Michael in 2018.

“That one hurricane [caused] $112 billion in damage, took out 52 or damaged 52,000 structures down there, completely destroyed more than 5,000 homes and it has put insurance companies out of business,” he said.

Florida property insurance company insolvent after losses caused by Hurricane Ian

“A lot of that has to do with the fraudulent claims that were filed in Florida,” Debbie said.

Roofing scams targeting insurance companies are leading to higher bills and fewer options for homeowners, officials say.

“Florida has had — according to many reports — a tremendous amount of fraudulent claims filed by roofing companies,” she said. ” And then the actual insurance adjuster — they’re like, ‘Yeah, there’s not that much damage and so we’re not going to pay that much of the amount that you are requesting, Mr. Roofing Company. And then they end up in court, fighting all these, these bogus claims.”

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State Farm Insurance pulls out of California because of catastrophes and increasing costs