Farmers Insurance Lifts Policy Caps, Expands California Homeowners Coverage

Farmers Insurance has removed the cap on the number of new homeowners insurance policies it can issue in California, a move that reflects expectations for a stabilizing market under the state's Sustainable Insurance Strategy led by Commissioner Ricardo Lara.

Previously, Farmers had imposed a cap of 7,000 to 9,500 new policies per month due to the challenging insurance climate marked by heightened wildfire risks, soaring rebuilding and reinsurance costs, and regulatory limits on rate increases. This environment led several insurers, including Allstate and State Farm, to curtail or cease new policies in California starting in 2022 and 2023.

The company's Sustainable Insurance Strategy-inspired rating plan aims to broaden coverage availability across California, especially targeting "distressed" areas where residents face difficulty in securing homeowner coverage. Starting in 2026, Farmers plans to directly market to approximately 300,000 consumers in these underserved regions and enhance outreach tools for local agents. The company also offers Smart Plan products for homeowners, condominium owners, and renters as part of this expansion.

To support this growth and address rising costs, Farmers is seeking regulatory approval for an average rate increase of 6.99% statewide, which would impact premiums paid by policyholders. Concurrently, it plans to increase multi-policy bundle discounts from 15% to 22%, incentivizing customers to combine home and auto coverage.

This development comes against a backdrop of regulatory oversight where California insurers require prior approval from the Department of Insurance before raising rates. The previous restrictions on rate hikes exacerbated financial pressures for carriers, contributing to the withdrawal or limitation of coverage options that have affected millions of Californians. Farmers' commitment to maintaining an open and viable insurance market includes resuming acceptance of new business insurance applications and manufactured home policies.

Overall, Farmers Insurance's strategic adjustments underscore the ongoing challenges and adaptive measures within California's homeowners insurance sector, highlighting efforts to balance market availability, regulatory compliance, and the financial sustainability of insurers amid evolving risk profiles and cost environments.