California’s Insurance Crisis: Why So Many Californians Are Getting Dropped 

Do you own a home or are you looking to buy one in California? If you do, you might not be able to get homeowners insurance — and you could even lose your current insurance coverage.

That’s because costly regulations imposed by California’s liberal politicians are making it financially impossible for insurance companies to continue to offer coverage in the state. In many areas, the cost of insurance has gone up by a factor of ten in the state in recent years — and it could get even worse.

In May 2023, State Farm Insurance announced it is leaving the home insurance market in California and will stop processing applications. State Farm represents 20% of California’s home insurance market.

Two weeks after State Farm’s announcement, Allstate also announced it would not be selling new home insurance policies — and submitted an application to the state to be allowed to raise their insurance rate for current customers by 39.6%. Before State Farm’s decision, they had requested a 28% rate hike. 

“The families left behind by the exit of these insurance companies are not only vulnerable to disaster, but left with limited insurance options and their costs will skyrocket if they get insured with a competitor,” said Carl DeMaio, Chairman of Reform California which is advocating for a complete overhaul of California insurance regulations.

“State Farm and Allstate are ceasing insurance in California entirely due to the policies and regulations state politicians have imposed that have made it unsuitable for them to continue business here and even hope to break even,” explained DeMaio. 

DeMaio cautions that other insurers will follow with similar decisions to exit California and/or impose draconian rate increases.

DeMaio points to costly mandates and regulations being imposed on insurance providers in California that no other state requires.

“Every new rule or mandate simply increases the cost of insurance to consumers,” DeMaio notes.

DeMaio also says bad policies have increased risk of losses in California that insurance companies have to cover. 

“Skyrocketing crime rates lead to greater property losses - and insurance rates for small businesses have spiked as a result,” DeMaio notes.

Then there are natural disasters. After the fires of 2017 and 2018, the amount of Californians who were cut from their home insurance plans jumped 42% due to disaster claims that eliminated insurance companies’ reserves. 

DeMaio says nothing can eliminate natural disasters, but California has failed to enact common-sense wildland fire and flood prevention policies.

“Instead of investing in solutions that are known to prevent or lessen disasters, California’s liberal politicians are more concerned with screaming about the Green New Deal and raising taxes,” said DeMaio.

DeMaio points to recent news about California’s goat herders as an example. Many state and local entities have employed goat herders in order for the animals to graze on brush that could pose a fire threat. However, a new California labor law could require that these herders receive a raise from $4,000 to over $14,000 per month — making the service unaffordable, putting the herders out of work entirely, and leaving dangerous fire-prone brush to grow.

DeMaio raises the concern that driving private insurance companies out of California could actually be the goal of the state’s liberal politicians in charge in Sacramento.

“California state government actually has a government insurance program called the FAIR program and they see the exit of private insurance companies as a good thing to help them gain revenue and market share for their government-managed policies,” DeMaio says.

“The problem with government-managed insurance programs is it costs much more, provides much less coverage, and is an absolute nightmare to get your claims approved,” DeMaio warns.

DeMaio says the only way to stop this impending insurance crisis and prevent rate hikes is to elect the right politicians that will reject rate increases and vote for common sense policies that promote proper preventative measures for disasters.

That’s why DeMaio and Reform California are leading the campaign to flip key seats in 2024. DeMaio’s annual “Plain English” voter guide, which includes recommendations on how to vote, will also be released closer to the March 2024 primary election.