New York
CNN
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State Farm is halting sales of new home insurance in California, citing wildfire risks and rising construction costs. declared Friday.
The insurance company on May 27 stopped accepting applications for all commercial and personal property and casualty insurance in California. However, State Farm’s decision will not affect existing auto insurance.
“State Farm General Insurance Company made this decision due to historic increases in construction costs that are outpacing inflation, rapidly growing catastrophe exposure and a challenging reinsurance market,” the company said in a statement.
California saw the average More than 7,000 wildfires occur each year, has used an average of more than 2 million acres over the past five years, according to data from the governor’s office. Scientists and California officials blame the climate crisis for the intensity of fire seasons.
“While insurance companies prioritize their short-term financial goals, the insurance industry’s long-term goal is to protect consumers,” said California Department of Insurance spokesman Michael Soler.
The factors behind State Farm’s action were beyond the agency’s control, Soler added.
“It’s important to note that existing State Farm customers are not affected, and no renewals are being offered as a result of this announcement,” Soller said.
State Farm, which along with its subsidiaries is the largest provider of auto and home insurance in the United States, said it is still working with the California Department of Insurance and lawmakers to build market capacity in the state.
“However, it is necessary to take these measures to improve the company’s financial strength,” State Farm said, adding that the rate would be reassessed according to market conditions.
The Illinois-based insurance group said its agents will continue to work with existing clients.
Last year, American Insurance Group said it was pulling policies on multimillion-dollar homes in California because of the risk of wildfires, the Wall Street Journal reported. reported.