Sacramento, CA – State Farm General, the California arm of the nation’s largest home insurer, plans to suspend writing homeowner policies for new customers in the state as of May 1. The decision, conveyed Friday to State Farm agents in California, was perhaps the first major salvo in insurers’ efforts to recover losses resulting from rising claims for mold, water damage and other losses.
“This probably shouldn’t be a surprise to anybody,” said Candysse Miller, spokeswoman for the nonprofit Insurance Information Network of California, a group devoted to property casualty insurance education.
“California’s homeowners-insurance market has been in a severely declining state for some time,” said Miller. “It’s been exacerbated dramatically by the mold situation in our state.”
State Farm, with 22 percent of California’s homeowners-insurance market, is among insurers that have requests for rate increases pending before the state Department of Insurance.
Allstate, which has more than 11 percent of the California homeowners-insurance market, is seeking a 22.3 percent increase in homeowner rates. That company is continuing to write new policies.
State Farm won a 6.9 percent rate hike last year. And the company has another 6.9 percent request pending.
Amelia Duer, a State Farm spokeswoman in Sacramento, said the company’s existing customers will be unaffected by the decision to stop writing homeowner policies for new customers.
But she said State Farm’s fund for protecting existing homeowners has fallen from $605 million to $425 million in the last two years.
“We want to slow our growth,” Duer said. “We don’t want to take on more than we can handle.”
While Duer did not single out the mold issue, she said claims have been mounting under the general heading of leakage and seepage, which includes mold.
Mold has become an increasingly hot issue nationally, and insurers say the number of lawsuits they are facing has accelerated.
Last year, a Texas jury awarded a plaintiff $32 million in a case related to mold against a Farmers Insurance Group subsidiary.
Miller of the Insurance Information Network added that California has become the leading state behind Texas in the number of mold claims filed by homeowners.