America’s biggest car and home insurer by premium volume, the insurance giant State Farm is expected to halt the sale of new home insurance policies in California over fear of wildfires and inflation of construction costs.
The latest development comes after a bout of wildfires in California last year. While wildfires are not rare in the western parts of the US, the climate crisis has exacerbated the issue, especially in California.
Available reports show that California saw 7,490 wildfires in 2022, an increase from the previous year, according to data from the California government. One wildfire in northern California destroyed 100 homes and other buildings, reported NBC News.
Starting on Saturday, the said that it will not accept insurance applications for business and personal lines property and casualty insurance. The company will still accept auto insurance applicants.
Read also: Study shows one in three GB News presenters cast doubt on climate science
“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 statement.
“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. We pledge to work constructively with the CDI and policymakers to help build market capacity in California. However, it’s necessary to take these actions now to improve the company’s financial strength, “the statement read.
Reports also show that existing customers insured by State Farm will not be impacted by the decision.
In response to State Farm’s statement, a spokesperson with the California department of insurance told Fox Business News that it is working to protect homeowners.
“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.
Story was adapted from the Guardian.
