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Farmers Insurance has dropped upwards of 100,000 policyholders in Florida, citing the state’s hurricane-heavy risk, and is reportedly limiting homeowner insurance in California due to wildfires.
However, the company added that the business decision would not impact customers who use Farmers’ owned subsidiaries such as Bristol West and Foremost Signature, CNN reports.
“Such policies will continue to be available to serve the insurance needs of Floridians,” Farmers Insurance spokesperson Trevor Chapman said in a statement. “Affected customers will receive notifications detailing when their coverage will end and will be advised of options for replacement coverage.”
The outlet reports a noticeable lack of national insurance companies operating in the Sunshine State, which requires companies to send a 120-day notice to policyholders if their policies aren’t being renewed.
Farmers made up barely two percent of the state’s insurance market, per CNN.
“Over the past 18 months in Florida, 15 home insurers have placed moratoriums on writing new business, four carriers have announced plans to voluntarily withdraw from the market and seven companies have been declared insolvent,” Insurance Information Institute’s Mark Friedlander told CNN. “Currently, there are 18 Florida residential insurers on the state regulator’s watch list due to concerns over their financial health.”
Friedlander added that this is a “man-made crisis,” noting Florida’s legal system promotes excess insurance claims.
Meanwhile, Farmers is also limiting new homeowners insurance policies in California. It was previously the second-largest such provider in the state, according to CNN.
Effective July 3, the company has placed a cap on the number of policies in California, citing wildfires and high costs of operating in the state.
“With record-breaking inflation, severe weather events, and reconstruction costs continuing to climb, we are focused on serving our customers while effectively managing our business,” Farmers Insurance said in a statement, per CNN. “(New policies will be limited) to a level consistent with the volume we projected to write each month before recent market changes.”
The move puts Farmers Insurance in league with State Farm and Allstate. The two companies similarly dropped their California policyholders last month and last year, respectively, according to the Associated Press.
Both also cited wildfire risk as a reason behind the decision, the outlet reports.
The companies are blaming limits placed on insurance premiums in states like California for dropping coverage statewide. Rising labor and building costs were also cited as reasons behind pulling out of California.
“The cost to insure new home customers in California is far higher than the price they would pay for policies due to wildfires, higher costs for repairing homes, and higher reinsurance premiums,” Allstate claimed in a statement last fall.
Wildfires are expected to continue statewide as temperatures rise, an analysis by the UN Environment Programme found.
