Thousands of Californians who won’t have their homeowners insurance renewed by State Farm this summer are homeowners across Los Angeles County, with some upscale Westside neighborhoods being hit hard, according to the insurer’s recent filings with the Department of Insurance.
A majority of the insurer’s customers in West Los Angeles neighborhoods as well as in or near the Santa Monica Mountains, including Bel-Air, Pacific Palisades and Woodland Hills, will lose coverage.
State Farm’s move affects some of the county’s most toned neighborhoods, adding another layer of expense and financial risk for homeowners in already costly and wildfire-threatened areas. Older homeowners and those on relatively lower incomes who bought at a time when housing was much cheaper could be hit hard.
Last month, State Farm — the largest home insurance provider in California – announced it would drop 72,000 home insurance policies across the state amid a home insurance crisis. Of these, approximately 30,000 are home insurance policies.
Denise Hardin, president and CEO of State Farm, explained the company’s decision in a March 20 letter to Insurance Commissioner Ricardo Lara, stating that the rate hikes recently approved by the Department of Insurance amid high inflation would be insufficient to restore the company’s financial situation. strength.
“We must now take steps to reduce our overall exposure so that it is more proportional to the capital available to cover such exposure, as most California insurers have already done,” she wrote. “We have been reluctant to take this step, recognizing the difficulty it would present for affected policyholders, in addition to our independent contract agents who are small business owners and employers in their local California communities. »
“A financial failure of (State Farm) will have a negative impact on the entire market,” Hardin added, “an outcome we are all trying to avoid.”
The letter also included several pages of ZIP codes and the number of homeowners who would lose coverage this summer.
In Pacific Palisades, according to the letter, 69.4 percent of the 2,342 policyholders — or about 1,600 — will lose coverage. In Brentwood, 61.5% of State Farm’s 2,114 customers will lose their policies, or about 1,300 non-renewals.
Of Woodland Hills’ 1,805 policyholders, 60% — or about 1,090 — will not be renewed, while in Bel-Air, 67% of 987 customers, or about 660 customers, will be affected,
Orinda in Contra Costa County and Los Gatos in Santa Clara County will also see large numbers of policyholders lose coverage.
As part of its assessment, the insurer looked at communities located in wildfire-prone areas as well as those at risk of fire following an earthquake, including communities such as Beverly Hills and Westwood.
Thelma Waxman, president of the Brentwood Homeowners Assn., whose 1,200 members own about 4,000 properties, said it has been a stressful time for members and for residents living near high-risk fire zones.
The loss of State Farm coverage “is the No. 1 talking point” among association members, she said. “Everyone is nervous.”
Last year, the association created its first California Fire Safety Council and worked closely with My Safe LA, a nonprofit organization providing fire and safety training, along with the Los Angeles Fire Department to try to reduce fire risks in the area.
Waxman said the formation of the safety council was partly a response to insurance companies abandoning their policyholders in the state.
“At first we thought we might get a discount,” she said, “but then it turned out we were trying to maintain our policies.” »
Waxman said she urged residents who lose their homeowners insurance with State Farm to start shopping now for a new homeowners insurance policy because it is difficult to find insurers writing policies in the state.
State Farm said non-renewal letters for homeowners insurance will begin going out July 3, then for commercial properties on Aug. 20.
State Rep. Jacqui Irwin (D-Thousand Oaks), whose district includes many affected neighborhoods, expressed concern but hoped the state could end the crisis by changing regulations to encourage insurers to “get back to writing policies for Californians and their properties.”
Insurance companies have cited high inflation, catastrophe risk, the cost of reinsurance (a type of insurance for insurance companies), and limits imposed by decades-old insurance regulations as reasons to reduce state policies.
With no other choice, a number of Californians have turned to the FAIR plan as a last resort. Funded by insurers doing business in California, the Fair Access to Insurance Requirement plan provides more limited coverage as a backup to homeowners unable to find affordable conventional policies.
But the increase in registrations is putting a strain on the public insurer, which faces a potential loss of $311 billion, compared to $50 billion in 2018.
State officials said the FAIR plan had a $200 million surplus and was at risk of being insolvent in the event of a catastrophic event.
Lara proposed a set of new rules that would allow insurers to raise their rates to cover reinsurance costs and projected losses from catastrophic fires, but would also require them to cover more homes in the canyons and hillsides of California.
The proposals, which aim to move people away from the FAIR plan and slow premium increases, have won support from insurance industry trade groups and some consumer groups, although some consumer advocates, such as Consumer Watchdog, have criticized the proposed rules.
In the letter to Lara, Hardin said State Farm would continue to cooperate with the state to find a solution to the homeowners insurance crisis.
“We are keenly aware of the policy challenges that actions needed to improve (State Farm’s) financial situation pose to broader reform efforts,” she wrote. “Please know that we have the continued desire and commitment to work with you and your staff, as well as the Governor’s office, to achieve these reforms as quickly as possible.
News Source : www.latimes.com
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