Farmers Insurance Sets Limits On How Many New CA Homeowners Policies They Issue

Farmers Insurance Group, the Los Angeles-based insurer group of vehicles, homes and small businesses, announced this week that they will be limiting the number of new homeowners insurance policies each month in California, becoming that latest insurance company in the state to limit or halt new homeowners policies.

While insurance companies have been reducing their presence in California in the past few years, some have made it harder for residents to obtain insurance, such as GEICO closing down all 38 of their offices in the state last year and State Farm raising driving insurance rates in March. However, the largest action came in May when State Farm Insurance, the largest property and casualty insurance company in California, announced that they would no longer be accepting new applications for any kind of insurance other than personal vehicle insurance due to large increases in construction costs and inflation. About a week later, it was revealed that Allstate had done the same thing, stopping all new homeowners insurance policies for the last several months.

For the companies, the reasons were simple: large increases in construction and reconstruction costs, inflation, and a largely increased risk of danger due to more wildfires. Despite public outcry at having fewer options for insurance and making it harder to buy a home, the companies implemented their plans in full. And this week, Farmers joined them.

In a statement, Farmers gave the same reasons as State Farm and Allstate. Specifically, this was record-breaking inflation, severe weather events, and reconstruction costs continuing to climb.

“We are working diligently with the California Department of Insurance and others interested in improving the availability of property insurance in the state,” said Farmers in a statement this week. “With record-breaking inflation, severe weather events, and reconstruction costs continuing to climb, we are focused on serving our customers while effectively managing our business. Effective July 3, Farmers will limit new homeowners insurance policies in California to a level consistent with the volume we projected to write each month before recent market changes.”

Under the new policy, Farmers will be capping the number of new homeowners policies accepted each month to 7,000. While this was where the number has been traditionally at for years, an influx of new applications following the new policies of Allstate and State Farm led some to believe that they would increase the number of new policies each month. But, with several problems facing the industry, and not wanting to take a greater risk, Farmers instead opted to just keep the same number of  slots open each month.

A new limit for Farmers

Faced with an upset public, the California Department of Insurance said on Friday that all existing customers will not lose insurance and that there are still many available options for new homeowners.

“In short: Californians are covered,” explained Deputy Insurance Commissioner Michael Soller. “While both State Farm and Allstate made a business decision to put a temporary pause on new homeowners policies in our state, current customers will not lose their insurance, and both State Farm and Allstate continue to write auto insurance. While the Department of Insurance cannot do anything about rising costs of repairs, materials, and rebuilding, we are not powerless.”

Experts told the Globe on Friday that, while not great for the insurance market in California, Farmers broke the recent trend and that new policies will still be coming in.

“Farmers is based in California, so it would not have been a good look to just stop everything like the others,” explained Trevor Connery, a lobbyist who has worked for insurance companies in the past, to the Globe on Friday. State Farm and Allstate are from Illinois and have been seeing the havoc with the policies in California and just decided to stop accepting new ones. Farmers is still accepting them, but not taking up the slack left by the other two leaving. But they are also their own company, and can choose what they want to do, and to them, the 7,000 limit makes the best fiscal sense while also still giving out policies.”

“Nevertheless, this is still putting many people in a crunch and now have to make a decision based on fewer options. The sky isn’t falling or anything like that just yet, but it is still very worrying. And Farmers will likely not be the last.”

Other insurance companies in the state are likely to make decisions on new property applications soon.