Hundreds of California homeowners’ insurance policies were cancelled last summer in Pacific Palisades—the same area that is now being ravaged by one of the worst wildfires in U.S. history.
Just another coincidence, nothing to see here.
State Farm, one of California’s largest insurers, cancelled hundreds of homeowners’ policies in Pacific Palisades last summer—a region now engulfed by a catastrophic wildfire.
The company defended its decision, citing a need to prevent “financial failure” as wildfires in California grow more frequent and severe, particularly in high-risk areas.
However, with multiple fires currently raging through Southern California, many affected residents may find themselves heavily reliant on insurance claims to rebuild their lives after the flames subside.
“Our top priority is the safety of our customers, agents, and employees impacted by the fires, as well as assisting our customers during this tragedy,” a State Farm spokesperson told Newsweek on Wednesday.
In recent years, private insurers have increasingly scaled back coverage in California’s fire-prone zones. Over the past three years, this trend has left many homeowners scrambling for alternatives.
As a result, the state’s FAIR Plan, designed as a last-resort insurance option, has seen its policy count more than double—from 202,000 in 2020 to 452,000 by 2024, according to CapRadio.
Many insurers cite California’s growing wildfire risks and strict regulatory environment as the primary reasons for reducing coverage.
They argue that current regulations prevent them from raising premiums to align with the rising risks, forcing companies to instead withdraw from high-risk areas altogether.
This ongoing retreat by insurers has created a property insurance crisis in California, leaving many homeowners unable to secure affordable coverage at a time when they need it most.
Three major fires are burning across Southern California: Palisades, Eaton, and Hurst. The Palisades Fire, which ignited on Tuesday evening, has torn through the affluent Pacific Palisades neighbourhood.
It was fueled by powerful winds and had scorched approximately 2,900 acres as of Tuesday night.
The Eaton Fire erupted near Pasadena in Eaton Canyon on Tuesday evening and had burned 1,000 acres by late that night.
Meanwhile, the Hurst Fire began near San Fernando on Tuesday, according to the California Department of Forestry and Fire Protection.
The Angeles National Forest reported on X (formerly Twitter) that the blaze had spread across 500 acres by Tuesday night.
According to The New York Times, by early Wednesday morning, strong winds gusting up to 100 mph continued to fan the flames, exacerbating the destruction.
State Farm’s retreat from California has been in motion for some time. In April 2024, the insurer announced the cancellation of 72,000 policies statewide, including 30,000 for homes and 1,600 specifically in Pacific Palisades, as reported by ABC 7.
This followed the company’s earlier decision, announced nine months prior, to stop issuing new homeowners policies in California.
Some ZIP codes experienced particularly high rates of policy cancellations. For example, in the Santa Cruz mountains’ 95033 ZIP code, over 65% of State Farm policies were discontinued last summer. In 95409, near Santa Rosa, nearly 48% of policies were cancelled, according to CBS News.
In a March 2024 letter to Insurance Commissioner Ricardo Lara, State Farm President and CEO Denise Hardin explained the difficult decision to reduce coverage.
“As we shared with the Department prior to the February 2023 filing, rate increases alone would likely be insufficient to restore State Farm Group’s financial strength,” Hardin wrote.
“We must take action to reduce our overall exposure to better align with available capital, a step most insurers in California have already taken.”
Hardin acknowledged the hardships this decision would bring, not only for affected policyholders but also for State Farm’s independent contractor agents, who are small business owners embedded in California communities.
Here’s what the area looks like after the destruction:
Everything is gone!
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