This is not good and is starting to make me wonder if State Farm is in financial trouble and if I need to start looking for another auto and home insurer here in PA?

2 months ago they jacked up my auto insurance 20% overnight and we haven't had a single accident or claim in over 10 years between the wife and myself:

California's largest insurer has given the state's government an ultimatum as the cost of providing cover continues to soar. State Farm on Thursday told California's Department of Insurance to let them raise home insurance rates for millions of citizens, or they will ax cover. The move by the insurance giant comes amid a growing insurance crisis in California.

Headlines a little misleading, it's not 50% across the board for all policies, the 50% only applies to renters policies. From the article:

State Farm General has aired an ultimatum to the entire state of California, saying it is seeking a 30 percent rate hike for homeowners, a 36 percent increase for condo owners, and a 52 percent increase for renters.

With the significant increase in property values, the higher cost to replace or fix damage to property since COVID it's not unexpected that insurance rate need to increase to cover the higher costs post COVID.

quote:

State Farm General has aired an ultimatum to the entire state of California, saying it is seeking a 30 percent rate hike for homeowners, a 36 percent increase for condo owners, and a 52 percent increase for renters.

I heard just yesterday that 12% of people across the country have no homeowners insurance, including a large number who have just recently decided to drop it because of all of these rate increases. These people are now "self insured" ie. uninsured.

I have State Farm and this was pretty easy to see coming.

The wildfires cause a tremendous amount of property loss aka Paradise fire from a few years ago, and the payouts to rebuild are high. One can debate whether the fires could have been prevented if there was an aggressive program to thin out the tree growth v. leaving it as nature intended.

But once the losses occurred, all of the carriers paid out a lot of money, as they should.

But the underlying problem is that CA is very strict on raising rates and the increases never reflect the cost of doing business and to build up reserves for future claims. This is what happened.

Other carriers have recently exited the earthquake coverage market for the same reasons and the state, has their own policy of sorts and as a last resort option. The problem, and the State readily admits it, is that they want to keep the coverage cost low, and they do that by decreasing the coverage. What required a 10% deductible through private coverage, has increased and the actual coverage has decreased, without an option to buy riders. Contents coverage was, for example, was decreased to only $10k of total contents. It really is shit coverage.

So Allstate, State Farm, Tokio Marine and other carriers leaving is not a surprise. Not at all, when the state doesn't allow market increases to cover losses and forecast losses.

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posted by HRK, quoting article:
State Farm General has aired an ultimatum to the entire state of California, saying it is seeking a 30 percent rate hike for homeowners, a 36 percent increase for condo owners, and a 52 percent increase for renters.

A distinction with no practical difference.

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posted by PASig:
2 months ago they jacked up my auto insurance 20% overnight and we haven't had a single accident or claim in over 10 years between the wife and myself:

Regardless of what State Farm's financial circumstances may be, start shopping for new insurance just on general principles. My own GEICO policy recently renewed for $20 less than the previous period. What's more, my rate has remained stable, even with two tickets back-to-back 12 years ago. Your circumstances may vary, of course.

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Posted by Flashlightboy:
So Allstate, State Farm, Tokio Marine and other carriers leaving is not a surprise. Not at all, when the state doesn't allow market increases to cover losses and forecast losses.

If there are other carriers leaving as well as SF, this is not necessarily an indicator of SF's financial health, good or bad. Nobody wants to remain in a state where overly burdensome regulations make it difficult or impossible to do business.

Will lenders start to require something like PMI if a HO doesn't have insurance?

California is quite happy to let the other states subsidize this. I’m all for State Farm walking. My home owners went up last month, my auto insurance went up 6 months ago. Million dollar McMansion and $100,000 pickup trucks, fender benders totaling EV’s? It’s unsustainable at 20th century rates.

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Originally posted by konata88:
Will lenders start to require something like PMI if a HO doesn't have insurance?

My guess is owners who have a mortgage will be required to have insurance no matter what. Once they pay off their mortgage, they could drop insurance. As far as I know, PMI is only for those not having a certain amount of equity.

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Originally posted by reflex/deflex 64:
California is quite happy to let the other states subsidize this. I’m all for State Farm walking. My home owners went up last month, my auto insurance went up 6 months ago. Million dollar McMansion and $100,000 pickup trucks, fender benders totaling EV’s? It’s unsustainable at 20th century rates.

Generally agree but the $1M McMansions are mostly priced for location and land, not the actual cost to build the house. Yes, the house can be larger and use expensive materials, but the land and location is a large part of the house price. A friend who was a builder was making houses for $400K even though sales price was $3M. (10 year old numbers).

I get insurance being sensitive to material cost increases, but not to housing price increases. Other than unnatural covid spikes in material costs, has costs increased that much of late?

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Originally posted by 6guns:

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Originally posted by konata88:
Will lenders start to require something like PMI if a HO doesn't have insurance?

My guess is owners who have a mortgage will be required to have insurance no matter what. Once they pay off their mortgage, they could drop insurance. As far as I know, PMI is only for those not having a certain amount of equity.

But if there are no providers willing to ensure you, then I would guess that lenders will want to cover their loans (which in a sense is what the home insurance does). So, in the absence of insurance, PMI? Or is the assumption that there will always be some provider that will insure you?

Where I live in the Bay Area, a “million dollar McMansion” is the price for a little condo…

10 years ago, a buddy could build a house in saratoga for $400K (large-ish house, stone tile floors/counters, viking appliances, etc) and sell for $3M (well, consider the land cost $1.5M).

My house, in a different zip and adjusted for size, would have been $800K and built for $300K. Costs are not too different but the price is dramatically different.

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Originally posted by konata88:

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Originally posted by 6guns:

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Originally posted by konata88:
Will lenders start to require something like PMI if a HO doesn't have insurance?

My guess is owners who have a mortgage will be required to have insurance no matter what. Once they pay off their mortgage, they could drop insurance. As far as I know, PMI is only for those not having a certain amount of equity.

But if there are no providers willing to ensure you, then I would guess that lenders will want to cover their loans (which in a sense is what the home insurance does). So, in the absence of insurance, PMI? Or is the assumption that there will always be some provider that will insure you?

I suppose the rules with have to change. I see what you're saying. How anyone can afford to live there is beyond me.

Farmers is no longer writing new homeowners policies in CA. They still renew my existing policy though.

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Originally posted by konata88:
But if there are no providers willing to ensure you, then I would guess that lenders will want to cover their loans (which in a sense is what the home insurance does). So, in the absence of insurance, PMI? Or is the assumption that there will always be some provider that will insure you?

It isn't a matter of finding providers, it's a matter of what they'll charge to insure and how much the homeowner is willing to pay.

However if a homeowner does not have insurance, they would in essence be in default of the conditions under which they are barrowing money and the lender could call their load

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Originally posted by Pipe Smoker:
Farmers is no longer writing new homeowners policies in CA. They still renew my existing policy though.

I have a shooting buddy who is an adjuster for Farmers.

I asked if he'd have to relocate and his response was that they weren't canceling any policies, they just weren't writing any new ones

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Originally posted by chellim1:
I heard just yesterday that 12% of people across the country have no homeowners insurance, including a large number who have just recently decided to drop it because of all of these rate increases. These people are now "self insured" ie. uninsured.

12% of people don’t have a mortgage?

My mortgage company makes clear the property is insured all the time or they call in the note.

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Originally posted by PR64:
Where I live in the Bay Area, a “million dollar McMansion” is the price for a little condo…

Here here. When we visited San Francisco, I could not get over the fact of how expensive another 1906 San Francisco earthquake will be. They might have improved building standards so there would hopefully be less death and injury, but all the 100 year old buildings that are jammed into San Francisco and the cost of them...it will make a Gulf Hurricane look like a nothing burger.

St. Louis will have a worse fate in injuries and death if the Great New Madrid Earthquake strikes again, few buildings there are built to earthquake standards and instead are built of brick for fire prevention. The majority of them are worth far less than San Francisco properties, much of St. Louis is vacant land and the population is far less.

The Zillow price for our AirBnB we stayed at, which was not luxury, was 100yrs old and seemed about average for the area was:

$2.3 Million

A similar home in St. Louis would be about $400K-$500K but would likely be 125-135 years old.

Location location location.

I think I saw where their S & P rating was reduced recently. Not enough that I'm worried about their ability to pay a claim, but it does impact their claims paying willingness so to speak.
I've been insured by them close to 50 years. I'm kind of stuck with them a bit longer due to a complicated umbrella issue I have. I plan th clear that up by year end. Once done I'll be shopping my coverage.
I've had a couple of claims over the years and they always treated me fairly.