Four more insurers are pulling out of California

Four insurance companies plan to stop writing policies in California. Getty Images

It is becoming increasingly difficult to find insurers in the coastal states.

Four home insurance companies say they won’t renew policies for people in California starting next year. This follows similar decisions by Allstate and State Farm last November. Allstate still offers home insurance coverage to current customers and auto insurance to new and existing customers, but it paused condo and homeowner insurance policies to new customers in California last November.

The latest move is from smaller insurers. Merastar Insurance Company, Unitrin Auto and Home Insurance Company, Unitrin Direct Property and Casualty Company and Kemper Independence Insurance Company plan not to renew policies.

The companies say the decision is part of a restructuring of their parent company, Kemper Corp., to exit the “preferred” market for homes and autos — an industry term referring to a level of risk.

That’s different from withdrawals by Allstate and State Farm, which were due in part to wildfires in the state as well as inflation.

The impact on housing

The four insurers make up less than 1 percent of the state’s homeowners insurance market. Still, more insurers pulling out of California, or at least reducing their presence in the state, could spell trouble for the housing market.

John Burns Research and Consulting’s vice president of research and demographics, Eric Finnigan, said earlier Wealth that a survey of homebuilders found that buyers are concerned about the cost and availability of homeowner’s insurance in their area, which in turn is slowing sales somewhat. For example, in Northern California, 20 percent of homebuilders surveyed at the time said buyers’ concerns about title insurance were slowing sales somewhat, and in Southern California, 29 percent of builders said the same. Nationally, only 9 percent of builders said insurance concerns are slowing sales somewhat. And it doesn’t help that California is dealing with its own insurance affordability crisis.

California is the latest state to see insurers pull out of the market. In Florida, four insurers reduced their exposure in the state after a series of natural disasters. Among them are Farmer’s Insurance, AAA, Bankers Insurance and Lexington Insurance, a subsidiary of AIG. And the survey mentioned above found that 32 percent of Florida homebuilders say buyers’ concerns about insurance are slowing sales, at least somewhat.

Extreme weather events are likely to continue to occur and may become more severe and more frequent. Wealth recently reported that since the 1980s, the U.S. has experienced an average of about eight major weather events per year that have caused at least $1 billion in damage. Over the past five years, they’ve jumped to 18, and so far this year there are 23. That’s a pretty big deal for insurers, who are already pulling out of markets they describe as challenging — and for homeowners who rely on their coverage.

A shrinking number of insurance options and an increasing number of disasters are hitting Floridians in the wallet. The average homeowner’s premium in the state costs more than $4,000, compared with the U.S. average of $1,544, according to E&E News, a division of Politico focused on environmental and energy news.

Florida’s chief financial officer did not take kindly to the moves, saying the companies were “too woke” and calling them “the Bud Light of the insurance industry.” I feel like there’s chaos in their senior team.’

[This report has been corrected with regard to the timing of Allstate’s decision to pull back from offering insurance in California, which occurred in November 2022, not earlier in 2023.]

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