The State Farm General Insurance Company will no longer accept new applications for property insurance and other policies in California, citing “historic” increases in construction costs and inflation,” the company said Friday.
Beginning Saturday, the Illinois-based insurance group will cease to accept applications for business and personal lines property and casualty insurance.
The move doesn’t impact personal vehicle insurance.
“State Farm General Insurance Company made this decision due to historic increases in construction costs outpacing inflation, rapidly growing catastrophe exposure, and a challenging reinsurance market,” the company said in a release. “The Department of Insurance is focused on the safety of our homes and communities.”
The insurance company said actions are necessary to improve its financial strength.
“We take seriously our responsibility to manage risk. We recognize the Governor’s administration, legislators, and the California Department of Insurance (CDI) for their wildfire loss mitigation efforts,” the company added. “However, it’s necessary to take these actions now to improve the company’s financial strength.”
State Farm agents in California will continue to serve existing customers, it said.
A spokesperson for the California Department of Insurance told Fox Business it is committed to protecting customers.
“The factors driving State Farm’s decision are beyond our control, including climate change, reinsurance costs affecting the entire insurance industry, and global inflation,” the spokesperson said.
California has some of the most expensive housing costs in the nation amid a shortage that many say has exacerbated the homeless crisis up and down the state.
The state plans to spend about $30 million to build 1,200 small homes.
In February, State Farm halted new coverage for some Kia, Hyundai drivers in several states because the vehicles were vulnerable to theft, it said.