California's second biggest homeowner insurer is stepping up coverage, a sign of turning tide

In a hopeful sign for California’s beleaguered insurance market, Farmers Insurance has reopened some closed lines of coverage and start writing more homeowners policies.

Beginning today, the state’s second-largest homeowners insurance carrier said it will resume offering several types of coverage that have been closed to new customers in California for more than a year, including renters and condominium insurance. It will also bump up the number of new homeowners insurance policies it accepts each month from 7,000 to 9,500.

Insurance experts said the move signals a reversal of the yearslong trend of insurers offering less and less coverage in California following catastrophic wildfires and spikes in inflation. It comes as insurance companies are anticipating an overhaul of state regulations, known as the Sustainable Insurance Strategy, to be implemented any day now.

Insurance broker and podcast host Karl Susman called it a “good-faith gesture on Farmers’ part” given the impending regulatory changes.

“I think that what we’re going to see is every other carrier start following suit,” Susman said. “And at some point — I would like to think by the middle of next year — we won’t have quotas per se at all. We’ll just have the free and open market again.”

As part of the new regulations, California will require insurers to increase the writing of comprehensive policies in “wildfire-distressed” areas and account for mitigation steps taken by homeowners, businesses and communities. In exchange, companies will be allowed to use forward-looking risk modeling that takes into account the effects of climate change when they are setting rates.

Michael Soller, a spokesperson for the California Department of Insurance, said Farmers’ move was a positive step forward and “a clear sign that our reforms are having an impact.”

The announcement from Farmers explicitly endorses the new regulations, which are awaiting final approval by the state Office of Administrative Law.

“Farmers Insurance has decided to take these steps to increase coverage availability for California consumers because we recognize that the state’s insurance marketplace has indeed improved,” Behram Dinshaw, president of personal lines for Farmers Insurance, said in a statement. “In addition, with the impending implementation of Commissioner Ricardo Lara’s Sustainable Insurance Strategy in the coming year, we want to be well-positioned to provide even more coverage options to residents in the state.”

Large carriers, including Allstate and State Farm, have dramatically pulled back from offering new or renewed coverage in California, seeking to limit their financial liability in a market with regulations they considered outdated and a threat to their bottom line.

After Farmers’ announcement, Susman said he’s also seeing other insurance companies slowly open up the taps and offer more coverage in California again, noting that Mercury Insurance is “aggressively writing property insurance.”

“And a lot of the less-known carriers that you might not recognize the names of, they’ve been writing fairly aggressively in California. They’re raising the limits of coverage that they were willing to take,” Susman said. “Maybe they were only taking coverage up to $1 million, and now they’re a million and a half or $2 million. So definitely … the tide is already turning.”