State Farm, one of the biggest insurers in California, canceled hundreds of homeowners' policies last summer in Pacific Palisades—the same area which is now being ravaged by a devastating wildfire.
The move was justified by the company as an attempt to avoid "financial failure" as the frequency and severity of wildfires is growing in the Golden State, especially in at-risk zones. But as the multiple fires currently burning through Southern California threaten to cause devastating losses for residents, many will likely need to rely on their insurers to get back on their feet after the blazes are contained.
Newsweek contacted State Farm and the office of Commissioner Ricardo Lara for comment by email on Wednesday early morning, outside of standard working hours.
Why It Matters
Several private insurers have cut coverage in at-risk areas across California in the past three years, leaving homeowners scrambling to find options for coverage. As a result, California's FAIR Plan, which works as an insurer of last resort in the state, has more than doubled its policies between 2020 and 2024, reaching a total of 452,000, as reported by CapRadio.
Most insurers who have limited their offer in the state mentioned the rising wildfire risk as well as the state's regulations as the main reasons behind their decision. Unable to increase their premiums to a level that will match their growing risk, companies have decided instead to cut coverage.
This has triggered an ongoing property insurance sector crisis in the Golden State as homeowners are finding it increasingly harder to find coverage at a time when they so desperately need it.
What We Know About The Fire
There are three fires currently burning in Southern California: Palisades, Eaton, and Hurst. The Palisades Fire started on Tuesday evening and scorched the affluent neighborhood of Pacific Palisades, spurred on by strong winds. As of Tuesday night, it was estimated to have burned 2,900 acres.
The Eaton Fire started near Pasadena, in Eaton Canyon, on Tuesday evening. It was estimated to have burned 1,000 acres as of later that same night.
Another fire, Hurst, was reported burning near San Fernando on Tuesday evening, according to the California Department of Forestry and Fire Protection. The Angeles National Forest wrote on X on Tuesday night that the fire had spread across approximately 500 acres.
The fires continued to burn across Southern California as of Wednesday early morning, propelled by winds gusting at nearly 100 mph, as reported by The New York Times.
Who Was Affected By State Farm's Cancellations
State Farm announced in April 2024 that it would have canceled a total of 72,000 policies in the state for houses and apartments, 30,000 of which were homes, as reported by ABC 7. According to State Farm, about 1,600 insured homes in Pacific Palisades lost coverage because of the decision.
The move came nine months after State Farm announced it wouldn't issue new homeowners policies in California.
Some ZIP codes saw a large percentage of their policies with State Farm being discontinued. More than 65 percent of policies in ZIP code 95033, in the Santa Cruz mountains, ended last summer; in 95409, near Santa Rosa, nearly 48 percent were canceled, as reported by CBS News.
A complete list of State Farm's cancellations in summer 2024 can be found at the very bottom of this article.
Why Did State Farm Cancel So Many Policies?
In a letter sent to the Insurance Commissioner Ricardo Lara in March 2024, State Farm President and CEO Denise Hardin explained that the decision to cut coverage in at-risk areas of the state was one they were "reluctant" to make, but that was necessary for the future of the company.
"As shared with the Department prior to the February 2023 filing, rate increases alone would likely be insufficient to restore SFG's financial strength," Hardin wrote. "We must now take action to reduce our overall exposure to be more commensurate with the capital on hand to cover such exposure, as most insurers in California have already done.
"We have been reluctant to take this step, recognizing how difficult it will be for impacted policyholders, in addition to our independent contractor agents who are small business owners and employers in their local California communities."
What People Are Saying
State Farm President and CEO Denise Hardin wrote to California Insurance Commissioner Ricardo Lara last year: "We are acutely aware of the political challenges that the actions needed to improve [State Farm's] financial position pose to broader reform efforts. Please know that we have an ongoing desire and commitment to collaborate with you and your staff, as well as the Governor's office, to achieve these reforms as quickly as possible."
California authorities are, however, trying to stop insurers from backing off the state's market. In December, the state passed a new regulation which will require insurance companies to offer coverage to residents in at-risk areas. Insurers will be required to write policies in areas "equivalent to no less than 85 percent of their statewide market share."
"Californians deserve a reliable insurance market that doesn't retreat from communities most vulnerable to wildfires and climate change," Lara said in a statement last month. "This is a historic moment for California."
What's Next
The 85 percent threshold required under the new regulation won't be reached immediately, but companies will have to match a 5 percent increase every two years.
Critics of the new regulation have raised concerns over the fact that the law doesn't require new policies fast enough to prevent what could be real disasters in at-risk areas, and that it could lead to consistent premium hikes.
If you're a Southern California resident who's been affected by State Farm's cancellations last year, please get in touch with us by contacting g.carbonaro@newsweek.com.
List of areas which had policies canceled
Here's a list of the cancellations made by State Farm in California last summer.
In Los Angeles County:
90024: Westwood—30
90027: Griffith Park, Los Feliz area—7
90046 and 90068: Hollywood Hills area—64 and 15
90049: Brentwood—1,301
90069: West Hollywood, Beverly Crest—29
90210: Beverly Hills, Beverly Crest—698
90077: Bel Air—665
90265: Malibu—518
90272: Pacific Palisades—1,626
90274: Palos Verdes Peninsula, Rolling Hills, Rolling Hills Estates—2
90290: Topanga area—53
90402: Santa Monica—82
91001: Altadena—70
91006: Arcadia—49
91008, 91010: Duarte—37 and 2
91011: La Canada Flintridge—150
91016: Monrovia—27
91024: Sierra Madre—21
91103, 91105, 91107: Pasadena—5, 6 and 134
91201, 91206, 91207, 91208: Glendale—1, 2, 1 and 3
91214: La Crescenta—19
91301: Agoura Hills—281
91302: Calabasas, Woodland Hills area—1,090
91304: Canoga Park, West Hills—166
91307: West Hills—81
91311: Chatsworth—274
91316: Encino—254
91321: Newhall—24
91326: Porter Ranch—211
91344: Granada Hills—30
91351: Canyon Country—5
91352: Sun Valley—2
91356: Tarzana—542
91364, 91367: Woodland Hills area—200 and 19
91381: Stevenson Ranch, Pico—6
91387: Canyon Country, Sand Canyon—12
91390: Santa Clarita—5
91403, 91423: Sherman Oaks—92 and 68
91436: Encino—433
91501, 91504: Burbank—3 and 7
91602: North Hollywood, Toluca Lake, Studio City—1
91604: Studio City—164
91711: Claremont—1
91741: Glendora—41
91745: Hacienda Heights—4
91750: La Verne—6
91765: Diamond Bar—30
91773: San Dimas—3
In Ventura County:
91360: Thousand Oaks, Mountclef Village, Greenwich Village area—24
91320: Newbury Park—46
91361: Westlake Village—310
91362: Thousand Oaks, North Ranch, Westlake Village—409
91377: Oak Park—7
In San Bernardino County:
91759: Mt Baldy—10
91709: Chino Hills—8
92315: Big Bear Lake area—1
92317: 2
92322: Cedarpines Park area—7
92325: Crestline—34
92346: Highland—1
92352: Lake Arrowhead area—262
92372: Pinon Hills—22
92382: Running Springs—22
92385: Skyforest—8
92391: Twin Peaks—11
92399: Yucaipa—13
92404: San Bernardino, Arrowhead Springs area—4
In Orange County:
90631: La Habra, La Habra Heights—2
92602: Irvine, Orchard Hills area—1
92603: Irvine, Shady Canyon area—23
92607: Laguna Niguel area—1
92625: Corona Del Mar—2
92651: Laguna Beach—8
92657: Newport Coast, San Joaquin Hills—101
92672: San Clemente—2
92676: Silverado—2
92677: Laguna Niguel—1
92679: Trabuco Canyon—88
92694: Ladera Ranch—1
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