Why did State Farm stop selling insurance in California?

State Farm is the nation’s largest car and home insurer by premium volume.
California has been trying to maintain a vibrant insurance market for homeowners despite the persistent threat of wildfire. In addition to the risks of natural disasters, construction costs have gotten out of control in much of the state. Construction costs in the state have outpaced even the high rate of inflation. California is increasingly unprofitable for insurers to operate in, despite raising premiums. There is a rapidly growing risk of catastrophe exposure. Insurance for insurance companies is called reinsurance, and this has posed a significant challenge to the company. It is becoming more expensive and difficult for insurance companies to protect themselves and remain profitable.
For now, home insurance policyholders that have State Farm will be able to keep their policies in effect, but the company will stop accepting new home and business policies.
Many homeowners in California believe their insurance rates are unfairly high. However, the decision for State Farm to exit California demonstrates that even at these inflated premium rates, California is still not worth the risk of conducting new business in.
In 2022, State Farm’s auto insurance business alone reported losses of $13.4 billion
Works Cited:
https://www.wsj.com/articles/state-farm-halts-home-insurance-sales-in-california-5748c771?mod=hp_lead_pos3
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