As Professor Jacobson has noted, “There’s that saying that collapse happens slowly, then suddenly.”

We may have just entered a phase of California’s collapse.

Legal Insurrection readers may recall that about a year ago, I noted State Farm was no longer accepting applications for new homeowner insurance policies in California. The largest home insurance company has just announced it will discontinue coverage for 72,000 homes and apartment policies in the state starting this summer.

Bidenomics and California’s regulatory overreach is to blame.

The insurer blamed inflation, regulatory costs, and the increasing risks from catastrophes for its decision to scale back in the blue state.

“This decision was not made lightly and only after careful analysis of State Farm General’s financial health, which continues to be impacted by inflation, catastrophe exposure, reinsurance costs, and the limitations of working within decades-old insurance regulations,” State Farm announced in a March 20 statement.

“State Farm General takes seriously our responsibility to maintain adequate claims-paying capacity for our customers and to comply with applicable financial solvency laws. It is necessary to take these actions now,” it continued.

The company said those impacted will be notified between July 3 and Aug. 20.

In response, California’s insurance commissioner Ricardo Lara wants to…investigate the insurance company’s finances.

“This is a real crisis,” Commissioner Lara told KABC in an interview Friday.

The commissioner said he wants to investigate State Farm’s finances, but warned that regulators can’t go too far, or else they would risk pushing companies out of California entirely.

“Insurance companies are not like utility companies,” he told KABC. “By law, they don’t have to be here, and when we try to overregulate, we’ll see what happened after the Northridge earthquake, when the legislature came in and tried to overregulate, and they no longer write earthquake insurance in California.”

Lara is spearheading an effort to enact the largest insurance reform in more than 30 years in California. He has proposed new regulations intended to change the models that insurance companies use to assess risk from catastrophes like wildfires or earthquakes, which he claims will stabilize premium costs and expand coverage.

Meanwhile, homeowners whose policies are not being renewed are told to use the state’s insurance option, the California Fair Plan.

• Customers should shop for another insurance policy by asking for recommendations from trusted sources or seeking an independent insurance agent.
• Utilize the California Department of Insurance shopping tools available on their website.
• Compare multiple policies, shop smart and choose the best coverage that suits your needs.
• Call the state’s insurance consumer hotline at 800-927-4357.
• Buy insurance through the California Fair Plan if you strike out in the normal marketplace.

The state creates wildfire problems through poor land management and eco-activist policies based on pseudoscience, then rakes in the money for insuring people against those problems.

The pace of the collapse will really quicken when there is another massive wildfire, which is very likely to occur as utility companies are being forced to divert funds into green energy nonsense rather than fire mitigation activities.

Some of our regulators are actually anticipating the consequences.

At a legislative hearing last week, Victoria Roach, president of the FAIR Plan Assn., warned lawmakers that the insurer of last resort had a surplus of only $200 million and was at risk of financial instability should a catastrophic event occur.

“We grew another $10 billion in exposure in January and another $15 billion in February,” Roach told lawmakers. “So the numbers just continue to climb, which is a concern — as those numbers climb, our financial stability comes more in question and we come closer to an assessment of the market should we, knock on wood, have a catastrophe.”

“We’re one bad fire season away from complete insolvency — it feels like a big gamble in many ways,” said Assemblymember Jim Wood, a Democrat from Sonoma County. “If this were on Wall Street, I’m not sure you’d be able to get away with this.”

No band-aid for this problem is currently being offered that actually addresses the underlying causes of inflation and regulatory overreach that led to State Farm’s decision in the first place.

Add this to the long list of many reasons people are fleeing the once Golden State.

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