Farmers Insurance to Increase Number Of Homeowner & Renter Policies in California

In a surprise announcement on Wednesday, Farmers Insurance said that they will be going against the trend of insurance companies in California by increasing the number of renters and homeowners policies.

For the past two years, insurance companies have been slowly limiting policies, ending the allowance of new policies, or generally reducing their presence in the state. In 2022, GEICO closed down all 38 of their offices in the state, with State Farm raising auto insurance rates in March of 2023. However, the largest action came in May 2023 when State Farm Insurance announced that they would no longer be accepting new applications for any kind of insurance other than personal vehicle insurance because of 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. Later in the year, Farmers announced new limits on the number of new homeowner insurance policies it will give each month, with numerous other insurance companies, such as Liberty Mutual, no longer offering certain policies in the state.

Other major insurance limiting factors soon struck the state as well. In August 2023, Farmer’s announced 2,400 layoffs, with nearly all companies raising rates by at least 20% in late 2023 and early 2024, including State Farm. For the companies, the reasons were simple: large increases in construction and reconstruction costs, a rise in crime, inflation, and a largely increased risk of danger because of more wildfires. In March, State Farm also made the drastic decision to remove 72,000 insurance policies in the state, roughly 2% of their total number in California. Two months later, both the Tokio Marine America Insurance Company and the Trans Pacific Insurance Company announces that they would be pulling completely out of California, ending over 10,000 home and umbrella insurance policies. Finally, more home insurance rate increases have also been announced, including 15% for Travelers, 34% for Allstate, and up to 50% for State Farm.

However, since the summer, the state Department of Insurance has been attempting to make the insurance situation better for companies and for those looking for policies. Plans, known as the Sustainable Insurance Strategy, are currently close to being enacted that would bring not only bring a new requirement that would have companies write more policies in wildfire areas, but also allow companies to factor in forward thinking modeling in setting their rates. As companies have been wanting the latter ability for years from the state, with climate change making past modeling less and less accurate in figuring out risk, the likely new rules have had insurance companies halt any more pullout plans in the last several months.

A change at Farmers

This led to Wednesday when Farmers Insurance announced that it will resume offering renters and condominium insurance, as well as bump up the number of homeowners policies they accept each month from 7,000 to 9,500. These new changes are to begin on Saturday.

“Farmers Insurance today announced it will resume offering coverage for multiple lines of insurance in California to new customers, including condominium, renters, umbrella, landlord, vacant and manufactured home, in a phased reintroduction beginning December 14, 2024,” the company said in a statement. “Many of the reopened coverage offerings had been temporarily paused for more than a year. In addition, Farmers, one of the few insurance carriers that did not halt offering new homeowners insurance coverage in the state, will increase the number of homeowners policies it will accept from new customers to 9,500 per month, from its previous commitment of 7,000 monthly.”

Behram Dinshaw, the president of personal lines for Farmers Insurance, made it clear that the state’s plans were the primary catalyst for Farmers’ new increases in the state.

“Farmers Insurance has decided to take these steps to increase coverage availability for California consumers because we recognize that the state’s insurance marketplace has indeed improved,” said Dinshaw. “In addition, with the impending implementation of Commissioner Ricardo Lara’s Sustainable Insurance Strategy in the coming year, we want to be well-positioned to provide even more coverage options to residents in the state.”

In a statement, the California Department of Insurance added that “Farmers’ move was a positive step forward and a clear sign that our reforms are having an impact.”

However, others remained concerned on Thursday as Farmers has not yet said how affordable these new policies would be for customers or where they would be focusing on giving the bump up of policies.

“So, all of this is a good sign for insurance companies,” explained Trevor Connery, a lobbyist who has worked for insurance companies in the past, to the Globe on Thursday. “In particular, the forward modeling. California did not want to give that to insurance companies because of how much it could increase rates. But, faced with insurance companies getting out of the state more and more, they had to give in to what the companies wanted.

“Notice that while they said the number of new policies will be increased, they said nothing of the rate. It’s likely going to be pretty high. So, yeah, overall it is looking good for the number of policies, we don’t know anything yet of affordability. And that will be the real deciding factor for consumers.”

As of Thursday, other insurance companies have yet to respond to Farmers’ decision.