California's largest homeowners insurance company, State Farm, will offer renewals to residential policyholders who've been affected by the fires that ravaged Los Angeles County over the past week.
The decision reverses State Farm's earlier plans to drop thousands of policies in neighborhoods affected by the fires, including Pacific Palisades, where many lost their homes to the flames.
Newsweek contacted State Farm for comment by email on Thursday morning, outside of standard working hours.
Why It Matters
The fires still burning across Los Angeles County have left a path of destruction in Southern California. Thousands of people have been left homeless after their properties were destroyed in the blazes, many of whom faced looming non-renewals from insurers trying to back off from the most at-risk zones in the state.
As the damages are estimated to be in the billions, homeowners insurance will be crucial to help residents rebuild their lives after the fires. State Farm's decision to offer renewals to those affected by the blazes will provide security for many.
What To Know
In an update published on Wednesday on its website, State Farm announced that the company has paused its notification process on homeowners non-renewals in the areas affected by the Los Angeles fires.
"Homeowner policies impacted by the fires that were on the books on Jan. 7 will have an option to renew with State Farm for another policy term," the insurer said. Those who had their policies lapse before January 7, when the fires started, won't receive an offer for renewal.
"The California market is complex, we remain engaged with state officials to improve the long-term sustainability of insurance for residents," the company added. "We're here to ensure that there's a sustainable market in California, so we can continue to serve California as we have for almost 100 years."
The Illinois-headquartered insurer "serves more customers in California than any other insurer," according to its own website. State Farm insures over one million homes in the Golden State, as per its own data, and more than 4 million autos. In Los Angeles County alone, the company insures 250,000 homes and 880,000 vehicles.
Why State Farm Wanted To Drop Those Policies?
State Farm announced in April last year that it was planning on canceling a total of 72,000 policies in California for homes and apartments by the summer, 30,000 of which were homes.
Many of the policies facing non-renewals were in zip codes across Los Angeles County and Ventura County—areas hit hard by the recent wildfires. In Pacific Palisades, a total of 1,626 policies were to be dropped.
In a letter sent to the state's Insurance Commissioner Ricardo Lara in March of the same year, State Farm's president and CEO Denise Hardin said the company was "reluctant" to cut coverage in Southern California but the decision was necessary to ensure the company's financial viability in the coming years in the face of growing catastrophe exposure.
"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 said. "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."
As reports of the decision emerged in the media following the beginning of the fires, many expressed outrage at State Farm, with some going as far as wishing a Luigi Mangione-style revenge for California homeowners against the insurer.
Which Policyholders Will Be Offered Renewals?
State Farm's decision to offer renewals to policyholders affected by the fires applies to homeowners, owners of rental dwellings and residential community associations.
This figure includes roughly 70 percent or 1,100 of the 1,626 policies still in place in Pacific Palisades' 90272 zip code, as well as thousands more policies in Southern California. It's unclear how many policies in the areas affected by the fires had already lapsed before January 7.
Lara applauded State Farm's decision on Wednesday and called for other insurers to follow in the company's footsteps. Last week, the commissioner issued a one-year moratorium that bars insurers operating in the state from announcing new cancellations or nonrenewal notices in the areas affected by the fires. However, the moratorium doesn't count for insurers who have already announced non-renewals.
What People Are Saying
California's Insurance Commissioner Ricardo Lara said in response to State Farm's announcement: "All eyes are on insurance companies right now, including mine. I've urged State Farm and all insurers to honor the policies they non-renewed in the areas I've protected through my moratorium powers, as communicated in my notice last week.
"Insurers need to do the right thing and stand by their customers. We will continue working to ensure that everyone's claims are paid fairly, quickly, and completely."
A spokesperson for State Farm told Newsweek last week: "Our number one priority right now is the safety of our customers, agents and employees impacted by the fires and assisting our customers in the midst of this tragedy."
What's Next
The fires burning across Southern California will likely cost tens of thousands of billions, though the full scope of the economic loss will only be determined after the blazes are extinguished. Many experts fear that the fires might push the Golden State's property insurance crisis to a "new level," with premiums rising and availability dwindling in the coming months.
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