SAN DIEGO — State Farm, California's largest home insurance provider, says it won't be renewing tens of thousands of policies beginning this summer.
Starting in July, State Farm will cut 72,000 residential and commercial policies statewide because of inflation, regulatory costs and increasing risks from catastrophes.
The company did not specify which customers are at risk.
"I think that right now is a really precarious time for a lot of California homeowners, said Doug Heller, Director of Insurance for Consumer Federation of America.
CBS 8 asked him what he suggests people do if they're set to lose coverage.
"It is time to start shopping the market immediately. That means going online to look for quotes, but also reaching out to different agents, not just one agent who represents a single company, but also an independent agent who might be able to represent multiple companies. Because there are insurance companies still selling in California," said Heller.
State Farm said it will alert affected customers before their policies expire and provide them with alternative options.
Heller said to make sure you don't have a lapse in coverage.
And if you're not finding what you need via insurance companies, the California FAIR plan is always an option as a short-term fix.
"If the worst case scenario is that you can't find a company willing to right, there is the California FAIR plan. Everybody gets a policy from the FAIR plan. But it's going to be expensive and not great coverage. So, think of it only as temporary coverage and continue to shop. The only thing worse than paying too much for insurance is finding yourself uninsured when you need coverage," said Heller.
CBS 8 spoke to a Rancho Bernardo man who had his insurance canceled by another company.
He is now using the FAIR plan, and says reaching out to an expert helped him go through the process.
"Get a local insurance broker. Don't try and do it yourself because it's going to be too difficult to try and work through the fair plan because they're so overloaded," said Sam Spooner.
CBS 8 reached out to the California Department of Insurance regarding State Farm’s decision.
Deputy Insurance Commissioner Michael Soller said:
“One of our roles as the insurance regulator is to hold insurance companies accountable for their words and deeds. State Farm General’s decision today raises serious questions about its financial situation — questions the company must answer to regulators.
As state regulators, we deal with companies that are national and multinational in scale. To be effective for Californians, we join forces with other states so we can understand the basis for insurance companies’ decisions and how they plan to recover financially. In this particular situation, we have been working with State Farm’s home state of Illinois to get a full picture of its financial condition and plan for improvement. We need to be confident in State Farm’s strategy moving forward to live up to its obligations to its California customers.
The Department of Insurance has experts ready to assist affected State Farm customers so they have no lapse in their coverage. We urge you to contact us at 800-927-4357 or insurance.ca.gov.
We are confident our Sustainable Insurance Strategy will improve conditions for the overall market. California is on track for enacting the state’s largest insurance reform in over 30 years. In addition, our Financial Surveillance Branch continues to monitor individual insurance companies’ financial situations as we navigate this insurance crisis.”
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