State Farm is stopping new home insurance sales in California, citing wildfire risks and skyrocketing construction costs.
On Friday, State Farm, one of the largest insurance agencies in the country stopped accepting new applications for business and personal lines and casualty insurance in California, the company said in a news release.
The company cited “historic increases in construction costs outpacing inflation, rapidly growing catastrophe exposure, and a challenging reinsurance market,” the company said in the release.
The new policy will not impact personal auto insurance, according to the release. State Farm’s independent contractor agents will also continue to serve existing customers.
California has seen an average of more than 7,000 wildfires each year, consuming an average of over 2 million acres, over the past five years, according to data from the California governor’s office. Scientists and California authorities blame the climate crisis for the intensity of the fire seasons.
According to CNBC News, the company said it will work with the California Department of Insurance and other policymakers to improve conditions in California.
However, State Farm said they also need to take action to improve their “financial strength.”
California wildfires have been more severe and costlier
From suppression costs to insurance claims, disaster assistance, and the hefty expenditures in fire prevention and mitigation programs, wildfires are a threat to our economy, both locally and nationally.
Wildfires seriously affect homeowners and businesses. And besides environmental and health damages, the financial impact of wildfires is also very high, worth billions of dollars.
For instance, a study by University College London showed that California’s 2018 wildfires alone cost the U.S. a whopping $148.5 billion. Capital losses and health costs within the state amounted to $59.9 billion.
The Hill reports that there were 7,490 wildfires in California in 2022 that burned more than 360,000 acres, which Cal Fire described as a “quiet year.” In the year prior to 2022, wildfires burned more than 2.5 million acres in the state.
