June 12, 2023
California has 40 million people, the most populous state in the US. State Farm is the largest insurance provider in the US. The insurance giant announced last week that it will no longer write homeowner insurance for new homes. This is a huge business decision for State Farm.
State Farm was founded in 1922 by a retired farmer. The company is headquartered in Bloomington IL. and employs 57,000 people, including 19,000 agents. The company has been very successful over the last 101 years. State Farm is ranked 42nd on the Fortune 500 list.
Barry Manilow wrote the popular State Farm jingle “like a good neighbor” in 1971.
State Farm announced the company can no longer assume risk for new homes in CA. The reasons, according to the company, are high new home/replacement construction costs and catastrophic losses due to wildfires. 25,000 homes have been destroyed in CA. in the last 5 years due to wildfires, and thousands more damaged. Thousands of businesses have also been lost. Replacement costs have skyrocketed.
California is not properly managing its forests. The number of massive wildfires can be reduced. Fuel load (dead/dying trees, grass, invasive species, fire breaks, controlled burns, and brush have to be managed. And think about the water being used to fight these fires.
California is not business friendly! Taxes are high, regulations are overwhelming, crime rates have soared, and huge companies are leaving the state. California has the highest gas prices in the US. at $4.90/gal. including a $.66/gal state tax.
Not being able to obtain insurance on homes will have a dramatic impact on lending, and thus, a cascading effect on the financial system.
California is in trouble.
High Truths and Low Lies 