State Farm in California

California Myth vs. Fact

Myth	Fact
Myth #1: State Farm is leaving the California market.	Fact #1: State Farm has had a presence in California since 1928. While we made some important business decisions in May 2023 and March 2024, nearly 2,000 licensed California agents continue to offer products to current and potential customers every day. Additionally, we continue to service the almost 7.9 million policies and accounts in California.
Myth #2: State Farm does not insure homes in wildfire prone areas.	Fact #2: While State Farm General is non-renewing a limited number of homes (less than 2% of our California business), we continue to insure over 1 million homes across California, including in high-risk areas, representing billions of dollars of risk.
Myth #3: State Farm is trying to cut costs and increase profits for its shareholders.	Fact #3: State Farm is not a publicly traded company and does not answer to Wall Street investors. The needs of our customers come first.
Myth #4: State Farm is raising rates just to make more profit.	Fact #4: It’s important to be there for our customers when they need us. State Farm General Insurance Company provides homeowners insurance in California. This affiliate’s financial condition has deteriorated in recent years. Our California homeowners insurance product line has not been rate adequate since 2007 due to challenges securing adequate rates. Rate increases are driven by increased costs and risk and are necessary for State Farm General to deliver on the promises the Company makes every day to its customers.
Myth #5: Homeowners insurance in California is very expensive compared to other states.	Fact #5: Home insurance premiums in California are below the national average.
Myth #6: State Farm is ceasing new homeowners business and non-renewing some customers in California in an attempt to change the regulations that govern insurance in the State.	Fact #6: The business decisions made by State Farm General Insurance Company are necessary to maintain the company’s financial strength in California. State Farm continues to work constructively with the Department of Insurance and other stakeholders.
Myth #7: State Farm’s parent company (State Farm Mutual) can just give State Farm General Insurance Company money to strengthen its financial position.	Fact #7: State Farm Mutual Automobile Insurance Company and each of its affiliates operate on an individual entity-by-entity basis without regard to the financial condition of any other affiliated entity. It is the expectation of State Farm Mutual that each affiliate will, on an individual basis over the long-term, generate and maintain capital sufficient to support itself. Such capital is not freely transferrable among affiliated entities.
Myth #8: State Farm General is dropping 1 million policies over the next five years.	Fact #8: Projections of policy losses over the next five years (out to 2028) included in the current rate filing for State Farm General in California are based strictly on historical customer-initiated policy lapse rates and not resuming writing new business in the State. We will continue to evaluate our approach based on changing market conditions.
Myth #9: State Farm General is only losing money because it’s overpaying its parent company for reinsurance.	Fact #9: Reinsurance is insurance for insurance companies and is similar to how consumers use insurance to manage their risks for their property and liability exposures. Reinsurance is a critically important part of an insurance company's claims-paying capacity, especially for companies like State Farm General writing property insurance in areas with significant risk such as wildfires. In fact, it allows them to write or keep more business than would otherwise be possible. Rebuilding the insurance market in California includes the ability for insurers to factor in the net cost of reinsurance as a legitimate business expense when setting rates. This will ultimately help improve consumer access to coverage and is already considered in rates in all states except California. Because the catastrophe risk posed by its book of business is so large, and the number of external reinsurers willing to take on that risk at a reasonable price is limited, State Farm General purchases some of its reinsurance from its parent company (State Farm Mutual Automobile Insurance Company). These reinsurance contracts are reviewed for fairness and compliance with legal requirements by State Farm General’s solvency regulator (the Illinois Department of Insurance).