Insurance Companies Abandon CA Homeowners as Fire Season Looms

By: Julia Mehalko | Published: May 04, 2024

Massive insurance companies have chosen to abandon California homeowners, right as the state is about to go through its upcoming fire season.

Insurers are pulling out of the state for various reasons. However, consistent national disasters — most notably the destructive wildfires California has recently had to deal with — have made some companies decide against providing insurance to thousands of homeowners in the state.

Allstate Has Paused Policies

In 2022, insurance company Allstate became one of the first insurers to begin to rethink its business dealings in California.

A home with a car parked out front seen in Santa Clara, California.

Source: Jose Rago/Unsplash

Allstate announced that it would pause all of its new home insurance policy sales throughout the state. According to the insurance giant, this all had to do with wildfire threats, as well as how expensive it had become to do business in California. 

State Farm Quit California

In 2023, State Farm followed Allstate’s lead and also announced that it would completely stop all new home insurance applications throughout California.

An aerial view of roads and homes in California in the daytime.

Source: Zetong Li/Unsplash

State Farm cited the skyrocketing increases in costs, especially construction costs, as why they had chosen to do this. They also pointed to high inflation as another factor. 

Renewing Home Coverage

In 2024, State Farm further changed what it offered in California by revealing that it would not renew home insurance coverage for tens of thousands of homeowners and some commercial property owners.

Homes seen in Newport Beach, California with the ocean in the distance.

Source: Sven Piper/Unsplash

This led to about 72,000 properties losing their insurance coverage in the state.

Tokio Marine America Insurance Co’s Decision

Tokio Marine America Insurance Co. is just the latest insurance company to decide to limit its business throughout the entire state of California.

Homes seen on the hills around Laguna Beach, California in front of the ocean.

Source: Joshua Sukoff/Unsplash

According to California’s Department of Insurance filings, the company revealed that it would stop offering new homeowners insurance. They also revealed they would stop offering umbrella policies. 

Trans Pacific Insurance Co’s Moves

Trans Pacific Insurance Co. also revealed that it would follow Tokio Marine America Insurance Co.’s suit. Both insurance companies are owned by Tokio Marine Holdings Inc., a Japanese firm.

Homes right off the beach seen in Newport Beach, California in the daytime.

Source: Marius Christensen/Unsplash

Both insurance companies’ decisions will affect more than 12,500 policyholders. These policyholders and homeowners will likely receive non-renewal letters in the upcoming few months, beginning on July 1.


California’s Fire Season

These latest insurance company departures come as California is already entering its regular fire season. Most California wildfires occur between April and October.

An aerial view of homes in San Francisco underneath a red sky after fires in 2020.

Source: Patrick Perkins/Unsplash

The most severe wildfires persist in the warmer, drier months of the year. However, Southern California can see severe wildfires in October and November, thanks to the Santa Ana winds. 


2024’s Fire Season

So far, analysts remain mixed on whether California will have a bad fire season in 2024. The weather has, so far, been rather unpredictable.

A wildfire seen at night in California in 2021.

Source: Russ Allison Loar/Wikimedia Commons

Already, experts have declared that the state will see a delayed start to the fire season thanks to certain weather patterns. Now, potentially severe wildfires may not be seen until May or June.


Insurance Companies Leaving California Because of Wildfires

Many of these insurance companies have decided to leave California, or at least halt their business, because of the growing threat of wildfires seen throughout the state. 

A firefighter battling a wildfire in California in 2007.

Source: Public Domain/Wikimedia Commons

Allstate spoke for many insurers when they said, “The cost to insure new home customers in California is far higher than the price they would pay for policies due to wildfires.”


High Costs Are Also to Blame

While wildfires have driven many insurers away from California, there are many other factors that have led to these departures. High costs for construction have often been cited by insurers as they’ve left the state.

Colorful homes seen on a street in San Francisco, California.

Source: Marcus Lenk/Unsplash

High inflation is yet another reason for reduced coverage in California. The state’s business regulations have also led to many insurers deciding they no longer want to deal with the state’s difficult landscape. 


California’s Home Insurance Crisis

Now, California has found itself in a crisis as so many homeowners no longer have home insurance — and can’t seem to find any new insurers agreeing to offer them coverage.

Large homes seen on the hills of Oakland, California in the daytime.

Source: Fredrick Lee/Unsplash

While the state’s government has made moves to try to help with this continuing crisis, no major action has yet been made to truly help residents of the state. 


Other States Face Issues

While California is arguably the main state in the country facing such a severe insurance crisis, they aren’t alone. Other states prone to natural disasters have also faced growing threats of insurers leaving.

An aerial view of Fort Lauderdale, Florida, with many homes and boats seen.

Source: Luiz Cent/Unsplash

Florida and Louisiana are just two examples of states that have seen an increase in natural disasters, thanks to climate change.