Why are insurance companies not insuring in California?
"Insurance companies need to remain profitable enough to comply with state law and to pay out the claims of their existing customers, but this has proven to be increasingly difficult in recent years due to wildfire losses and other factors," said Angele Doakes, senior manager of property and casualty insurance strategy ...
The conditions in the state have led the insurers to believe that California drivers are too expensive to insure. Auto accidents increased 25% between 2020 and 2021, where at the time, premiums increased only 4.5%. The insurers were paying more in claims than they were making in premiums.
As if high gas prices weren't making life miserable enough, California drivers are being buffeted by higher auto insurance premiums — if they can find coverage at all. Frustrated by state regulations, a number of insurers have limited the new policies their agents can sell in California.
The growing risk of wildfires in some areas has cost insurance companies too much money, SFGATE previously reported. Other providers like Safeco and Allstate have also made similar decisions about taking on or renewing more California homeowner policies.
Overall in California, the average annual car insurance premium went up about 18% from 2023 to 2024, according to Bankrate.com. Zemansky was unsure whether rate increases similar to Allstate could become the norm for car owners. He said that similar to the homeowners market, the number of options is shrinking.
Allstate, the state's fourth-largest property and casualty insurance provider, has stopped selling new home, condominium or commercial insurance policies in California, the company said in an emailed statement.
The Chronicle reports that insurance industry magazines linked Geico's decision to close California sales offices to its failure to raise insurance prices in compliance with Sacramento regulations and other market forces.
Geico, Progressive, USAA, State Farm and Allstate are the best car insurance companies in California based on cost, reputation and coverage options.
| Insurance company | Bankrate Score | Average full coverage rate |
|---|---|---|
| Progressive | 4.4 Rating: 4.4 stars out of 5 | $2,199 |
| Geico | 4.4 Rating: 4.4 stars out of 5 | $2,206 |
| State Farm | 4.3 Rating: 4.3 stars out of 5 | $2,932 |
| Mercury | 3.8 Rating: 3.8 stars out of 5 | $2,050 |
The American insurance giant is no longer offering in-person locations to purchase car and homeowners insurance in the state, the company's website shows. A member of the company's service team confirmed on Twitter on Wednesday that Californians' insurance policies are still valid.
Why is State Farm pulling out of California?
The decision comes as a result of an exhaustive review of the company's financial stability, which has been adversely affected by various factors including inflation, exposure to natural disasters, increasing reinsurance costs, and outdated regulatory frameworks.
The insurer plans to send non-renewal notices to 72,000 home and apartment policyholders starting this July. State Farm plans to stop renewing home and apartment insurance policies in California beginning July 3.
Seven of California's largest property insurers, State Farm, Allstate, Farmers, USAA, Travelers, Nationwide and Chubb recently decided to limit new homeowners policies in the Golden State, raising questions about the stability of the California home insurance market.
Travelers scored as the best car insurance company in California overall, according to NerdWallet's 2024 analysis. Drew Gula is a NerdWallet authority on auto insurance. He previously worked as the senior content editor at Soundstripe and as the senior writer in Liberty University's marketing department.
Geico, USAA, Mercury Insurance, Progressive and CSAA are the five cheapest car insurance companies in California, according to our research. The average cost of full-coverage car insurance in California is $193 per month or $2,313 per year.
Why now? SUMAGAYSAY: Well, during the beginning of the coronavirus pandemic, the state approved fewer rate increases because fewer people were on the roads. Now, insurers say they're trying to catch up. They say there are more accidents, and when they have to pay out insurance claims, the payouts cost more.
Since May, several large and small property insurance providers, including Allstate, State Farm, Farmers and USAA, have decided to limit business or leave California altogether.
- Hippo: Our pick for fast quotes.
- Liberty Mutual: Our pick for discounts.
- Farmers: Our pick for customizable coverage.
- Nationwide: Our pick for inclusive standard coverage.
- USAA: Our pick for club members.
The companies say the decision was part of a restructuring of their parent company, Kemper Corp., to exit the “preferred” home and auto market—an industry term referring to a tier of risk.
The companies are blaming wildfires, inflation that raised reconstruction costs, higher prices for reinsurance they buy to boost their balance sheets and protect themselves from catastrophes, as well as outdated state regulations — claims disputed by some consumer advocates.
Are insurance companies leaving California?
Two additional insurance companies are pulling out of California. Tokio Marine America Insurance Co. and Trans Pacific Insurance Co., will not renew their customers' home insurance policies, the California Department of Insurance confirmed to KQED in an email.
State Farm announced in May that it would no longer take on new home insurance applications in California due to “historic increases in construction costs outpacing inflation, rapidly growing catastrophe exposure and a challenging reinsurance market.” Allstate followed along in June, citing similar reasons for leaving ...
Allstate announced in November 2022 that it would “pause new homeowners, condo and commercial insurance policies in California to protect current customers,” the Associated Press reported in June.
The average cost of homeowners insurance in California is $1,405 a year or $117 a month, well below the national average annual rate of $2,601. California home insurance rates vary by location; home insurance rates in Los Angeles are above average, while homeowners in San Jose pay lower-than-average rates.
