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Farmers Insurance puts cap on new California property policies

Woodland Hills firm becomes third major insurer to limit exposure in state

Farmers' Raul Vargas; California; houses; scribbles
Farmers' Raul Vargas (Farmers Group Inc., Getty)

Farmers Insurance has become the third major property insurance company to announce that it would limit writing new home policies in California this summer, TRD has learned.

Woodland Hills-headquartered Farmers made a filing with the California Department of Insurance June 30 that would put a cap on new policies for homeowners coverage, according to a source familiar with the company.

Starting July 3, Farmers plans to cap its coverage at around 7,000 new homeowners policies a month in California. 

Late in May, State Farm announced that it would stop writing new policies in the state. Allstate said that it would stop writing new policies shortly after the State Farm announcement.

Farmers controls 14.5 percent of the state’s homeowner insurance market, ranking in second place, according to Fitch Ratings. State Farm ranks No. 1 with 20.6 percent of the market, and Allstate is fifth with 6.4 percent.

“With record-breaking inflation, severe weather events and reconstruction costs continuing to climb, we are focused on serving our customers while effectively managing our business,” Farmers said in a statement. 

The company also made moves to scale back its policies in Florida. According to media reports, it put a “pause” on writing new homeowners policies to manage its risk in the Sunshine State. 

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News of insurance companies stepping back from writing new policies has caused anxiety among real estate agents, but Dedree Hoyt, a veteran agent who focuses on San Fernando Valley and Simi Valley properties, said there are still a lot of companies actively marketing homeowners insurance. 

“AAA is still writing. Mercury is still writing. Even if they stop writing, The California Fair Plan will insure a house, but it will be expensive,” Hoyt said. “I don’t think it will stop real estate.” 

Hoyt is affiliated with Keller Williams Exclusive Properties. 

Inventory in the single-family house market is so tight that people who need to move are willing to pay more for a home, she added.

On the heels of Farmers’ announcement, a property insurance trade group said that California needs to change its insurance regulations so sellers wouldn’t have to put a cap on new policies or step back from the market. 

“Insurers do not want to retrench from one of the nation’s most important markets, but cannot continue to operate and protect policyholders when insurers are struggling to secure an adequate rate and manage their risk exposure,” David Sampson of the American Property Casualty Insurance Association said in a statement. 

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