by Josue Torres (NewsBreak)
Photo by Jose Rago on Unsplash
In a new move impacting tens of thousands of Californians, a prominent insurance provider associated with Farmers Insurance Group, the second-largest property and casualty insurer in California, has decided to relinquish its Certificate of Authority.
This decision, as seen in a recent filing with the California Department of Insurance, necessitates a transition for affected policyholders to new insurance providers, though many of them will receive offers from within the same parent company.
The insurer in question, known as Farmers Direct Property and Casualty Insurance Company, will be discontinuing its participation in all insurance programs within the state of California. This includes insurance policies for homes, automobiles, and renters.
To mitigate the transition’s impact, most policyholders currently under Farmers Direct will be extended “soft-landing offers.” These offers will resemble policy renewals within another Farmers Insurance company, as explained by Michael Soller, the Deputy Insurance Commissioner. Soller estimates that only around 2,800 Farmers Direct policyholders may not receive such offers.
The process of transitioning has already begun, with Farmers Direct ceasing to underwrite new policies in California as of September 15, coinciding with the relinquishment of its Certificate of Authority. Existing policies will continue to be serviced, but active policyholders have begun receiving non-renewal notices. These non-renewals will take effect on a rolling basis, commencing in mid-December.
Most of the affected policies in California under Farmers Direct are related to auto and home insurance. As of June, the company held approximately 57,938 auto policies and 19,778 home policies.
The parent company, Farmers Insurance, had already initiated a strategic shift in its coverage within the state. In July, Farmers Insurance implemented a policy cap on the number of new policies written each month. This move was driven by factors such as record-breaking inflation, severe weather events, and escalating reconstruction costs. Florida, another coastal state subject to severe weather conditions, saw a similar policy adjustment.
Farmers Insurance is not the only insurer making significant changes in the California market. Both Allstate and State Farm have halted the issuance of new policies in the state, attributing their decisions, in part, to wildfire damage.
Four smaller insurance brands affiliated with Kemper Corp. have also submitted plans to exit the state, with non-renewals for existing policies set to commence in 2024. While these departures are not explicitly tied to wildfires or severe weather, they represent a further reduction in insurance options for Californians.
The California Department of Insurance is actively working to address the diminishing landscape of insurance options, particularly for individuals residing in high wildfire-risk areas. To this end, they have devised a series of new rules set to be implemented by the conclusion of 2024.
Among these rules, one significant change is the requirement for insurers to underwrite at least an average of 85% of their market share in high-wildfire-risk communities within California, thereby ensuring greater accessibility to insurance coverage for those in vulnerable regions.
