The Orinda Insurance Crisis

State Farm Nonrenewals appear to be hitting the small town of Orinda the hardest in all of Northern California. In may in fact be the hardest hit in the entire state. In 2024 State Farm announced that it would non renew over 1,500 policies in the small east bay town. This represents over 50% of the policies that they have in this one small east bay city. For the unfortunate consumers hit by these nonrenewals – they need to take action now. 2023 and 2024 have been especially challenging years in the California insurance market, however this decision by State Farm may bring us all to a new low.

Marindependent Insurance Services LLC does not in any way represent State Farm and their group of companies.

The Orinda State Farm Crisis Explained:

On or around May of 2023 State Farm, a California admitted insurer, publicly stated that they would halt all new property insurance submissions. This according to their own website and numerous newspapers and websites. According to their own site they “cease[d] accepting new applications including all business and personal lines property and casualty insurance, effective May 27.” However – at that time it did not appear that they had decided to nonrenew any insurance policies. According to the CA DOI: “Current customers will not lose their insurance. There are no non-renewals taking place with this announcement and State Farm continues to write new private passenger auto insurance policies.” Source.

That all changed on or about March 27th 2024. CBS reported “State Farm will discontinue coverage for 72,000 houses and apartments in California starting this summer…” And according to that exact same article: “The California Department of Insurance said State Farm will have to answer question[s] from regulators about its decision to discontinue coverage.” [Since the publication of the SF announcement there has been no updat on these answers.]

While 72,000 homes is a huge hit for the State, the Zip code of Orinda was hit the hardest. According to NBC San Diego “The hardest hit community in the state is in Orinda…State Farm will not be renewing 1,703 policies in the 94563 ZIP code, which represents 55% of the city’s homeowner policies…” Not renewing and nonrenewing are basically the same thing.

Why Did State Farm Nonrenew all of these Orinda Homes?

According to that same NBC article and several other media reports State Farm stated that after “careful analysis of State Farm’s financial health, which continues to be impacted by inflation, catastrophe exposure, reinsurance costs and the limitations of working within decades-old insurance regulations.” In other words – well we won’t get into our opinion of what this statement means. Suffice it to say – someone finally figured out they are exposed on multiple fronts here.

Additionally on April 2nd of 2024, AM Best, an Insurance rating agency, downgraded “State Farm General “State Farm General to “B” (fair) from “A” (excellent) and the long-term issuer credit rating to “bb+” (fair) from “a” (excellent).” State Farm General is one of numerous corporate insurance entities under the State Farm brand. The rater – “AM Best said the ratings reflect State Farm General’s balance sheet strength, which AM Best assesses as weak, referring to the first building block on an insurer financial strength rating. ” Insurance Journal Source: AM Best Downgrades Ratings of State Farm General.

How interrated the nonrenewals and the downgrade are – is open to speculation.

What to Do if You Live in Orinda and are Being Nonrenewed?

If you are being nonrenewed by State Farm the first step is to gather up all of your paper work. Call your State Farm agent and confirm that you are indeed being nonrenewed. Remember if 55% of the town is being nonrenewed -45% are not. Therefore you may not be one of the unlucky folks. At that time, ask for a copy of claims record with them. In personal lines [home insurance]- this is sometimes know as a Letter of Experience. In commercial lines [apartments] this is sometimes known as Loss Runs. Get reports that go back at least five years.

Next – you will want to reach out to a few insurance agency options. I have argued many times that it “may make sense” to shop the agent and not the insurer. Sometimes that still holds true. One insurer as of the writing of this blog post, that I would contact yourself is AAA. Call them and see if they will write your policy. Additionally you should contact an independent broker who can shop vestigal admitted insurers in addition to nonadmitted and FAIR/Companion options.

Certainly you will want someone helpful and experienced to walk you through your best options. However there may not be too many options. It will depend on your situation. Important factors include the exact location and build characteristics of the home. Claims history is another major consideration.

Who is State Farm?

State Farm is a largest writer of home insurance policies in the great state of California. The company was founded in 1922 and is based in Bloomington IL. The Chairman and CEO is Michael Tipsord. State Farm by many measures is one of the largest insurers of personal lines insurance in the United States. The insurer is a mutual insurer.

Marindependent does not represent State Farm.

The Difference between Cancelling Insurance and Nonrenewing Insurance:

Cancelling and nonrenewing insurance policies are not the exact same thing. This insurance agent believes that nonrenewing is a form of timed insurance cancellation to be specific. However generally speaking cancelling insurance is to end it on a specific date and that date does not necesarily have anything to do with the renewal date. A nonrenewal is when an insurer decies to NOT offfer of renewal terms, For property insurance in the United States, most policies are in one year increments. Assuming you pay in full, the policy is typically in force for that entire year.

There are numerous rules, in the state of California about issuing nonrenewals. “A written notice of nonrenewal must be forwarded to you at least 75 days before the expiration date.” Typically these noteices are sent via US Mail and in some instances these go out more than once. There are numerous other rules and regulations concerning these decisions to NOT renew your home insurance.