State Farm announced it will not accept new business or personal property insurance applications for the state of California. The given reason that the mainstream media is pushing relates to climate change. California obviously has serious issues when it comes to wildfires and flooding. The media wants to report that State Farm is simply mitigating its risks. This conclusion is only partially correct.
Another problem is California’s Proposition 103. This law creates an environment that restricts insurance companies from raising their rates. To account for the obvious risk of natural disasters that a state like California has, State Farm needs to raise rates. Proposition 103 and the reality of California on the ground create an impasse for State Farm and other insurance companies. If State Farm was allowed to raise rates in California, then they would most likely just do that instead of bowing out of the state.
SOURCES:
State Farm will stop insuring new homes in California due to wildfires
State Farm Cuts New Home Insurance in California, Citing Wildfire Risk
State Farm won’t insure California homes, wildfires and rebuild costs – The Washington Post
State Farm no longer accepts homeowner insurance applications in California : NPR
State Farm stops home insurance sales in California, citing wildfire risks | CNN Business
