State of Emergency Sought in California as Insurance Providers Flee

By: Sam Watanuki | Published: Jul 09, 2024

San Bernardino County supervisors are ringing the alarm bells. On June 25, they voted unanimously to ask state officials to declare a statewide emergency.

This move aims to address the shrinking number of insurance providers willing to cover properties in California.

Major Insurers Are Pulling Out

State Farm and Allstate have already started limiting their business in California. State Farm stopped accepting new applications for all business and personal property insurance last year, leaving many residents scrambling for alternatives.

Historic old homes seen in San Francisco in the daytime.

Source: David Vives/Unsplash

This trend is concerning for homeowners across the state.

The Impact on Homeowners

With major insurers pulling out, many Californians are turning to the FAIR plan for coverage. The FAIR plan is a last-resort option that provides basic hazard insurance.

A woman looks over her bills, clearly stressed

Source: Freepik

However, it’s not designed to replace comprehensive coverage, leaving homeowners with limited protection.

State Farm's Recent Rate Hike Request

Adding to the woes, State Farm General recently asked the California Department of Insurance to approve a rate increase for homeowners, condo owners, and renters.

Four piles of coins, each getting bigger. A green arrow is above them, and it is gradually going upward.

Source: upklyak/Freepik

This potential hike further threatens the affordability of insurance for many Californians.

San Bernardino's Resolution

The resolution passed by San Bernardino supervisors calls for a state of emergency.

Lawyer fills out paperwork on a desk with a judges gavel beside him

Source: Freepik

This declaration would prevent insurance companies from dropping existing homeowners’ policies, providing some stability in the tumultuous market.

Insurance Commissioner’s Role

California Insurance Commissioner Ricardo Lara is a key figure in this crisis.

Newsom standing at podium

Source: Wikimedia

The resolution urges him, alongside Governor Gavin Newsom and the State Legislature, to take immediate action to stabilize the insurance market.


Governor Newsom's Potential Response

Governor Gavin Newsom is now under pressure to respond.

California Gov. Gavin Newsom speaks during a press conference at The Unity Council on May 10, 2021 in Oakland, California.

Source: Justin Sullivan/Getty Images

The declaration of a state of emergency could be a crucial step in protecting California homeowners from losing their insurance coverage.


Farmers Insurance Joins the Exodus

Farmers Insurance is also scaling back its operations in California.

In an aerial view, a golf course among homes at Desert Falls Country Club, next to undeveloped sandy desert, exhibits sun scorched grass as record-breaking heatwaves occur across the nation on July 23, 2023 near Palm Springs, California.

Source: David McNew/Getty Images

This trend of major insurers pulling out conveys the urgent need for state intervention to maintain a functional insurance market.


The Role of the FAIR Plan

While the FAIR plan is a temporary safety net, it’s not a viable long-term solution.

A lawyer is pictured at his desk

Source: Freepik

The increasing reliance on this plan highlights the severity of the insurance crisis and the need for comprehensive reforms.


Legislative Action Needed

The State Legislature’s role in this crisis cannot be understated.

Gavel with a gold band on a desk

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Legislative action is essential to enact measures that will strengthen and stabilize California’s insurance market, ensuring residents can secure adequate coverage.


Economic Implications

The insurance crisis has broader economic implications.

Multi-colored houses on a street. Cars are parked outside the houses.

Source: Enric Cruz Lòpez/Pexels

Homeowners without proper insurance coverage may face financial ruin in the event of a disaster, which could have a ripple effect on the state’s economy.


Looking Ahead

The call for a state of emergency is a pivotal moment for California.

Gavin Newsom standing behind a wooden lectern. The U.S. and California flags are behind him.

Source: Office of the Governor of California/Wikimedia Commons

As the situation unfolds, the actions of state officials will be crucial in determining whether the insurance market can be stabilized and homeowners can find reliable, affordable coverage.