Two More Insurance Companies Pull Out Of California

According to new California Department of Insurance filings this week, both the Tokio Marine America Insurance Company and the Trans Pacific Insurance Company announced that they would no longer offer homeowners and personal umbrella insurance in California and would leave the state.

For over a year, 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 driving 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 20023 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. Last month, State Farm also made the drastic decision to remove 72,000 insurance policies in the state, roughly 2% of their total number in California.

This led to the Japanese Tokio Marine Holdings, the parent company of both Tokio Marine America Insurance Co. and Trans Pacific Insurance Co., to announce this week that they would be withdrawing from California. In total, both companies currently have 12,556 homeowner insurance policies in California, along with 2,732 personal umbrella policies. Nonrenewal notices are to begin July 1st, with those expected to wrap up by August 2025.

In a statement, Tokio Marine said that the pullout was because of “Technology supporting the personal lines business is at the end of its useful life. Due to the small size of our personal lines book and the undue financial burden of the cost to update necessary automation, we are unable to continue supporting our personal lines operation.”

Department of Insurance spokesman Michael Soller also noted that the impact of the two companies pulling out would be minimal, because of their small sizes.

Nonetheless, the pullout of California by the companies showed a still shrinking insurance market in California, and highlighted the growing difficulties for Californians to get certain types of insurance.

“They may be small companies, but you could tell that they did the math and it was just not going to continue to keep working for them,” explained Trevor Connery, a lobbyist who has worked for insurance companies in the past, to the Globe on Friday. “The state isn’t giving incentives for them to stay, costs are up, and many homes in the state are at a higher than normal risk. And so many other reasons too.

“Yes, these are small companies, but that means fewer options on the table, not to mention thousands of residents now scrambling to get new policies. And you know that this isn’t over yet.”

More insurance company announcements regarding policies in California are likely to occur through the rest of the year.