State Farm to Sell Home Insurance in State Again

State Farm General Insurance Co., the largest provider of homeowners insurance in California, will end a 17-month moratorium on selling to new customers Oct. 1, a company spokesman said Tuesday.

But its return to the market will be limited, spokesman Bill Sirola said. State Farm will add new homeowners in an amount equal to the number of existing customers who drop out or whose polices are not renewed by the company, probably about 60,000 in the next year, he said.

Sirola attributed the reopening of sales to new customers to “very encouraging” economic trends and to a successful restructuring of State Farm offices in California. Another reason, he said, was a recent court decision striking down regulations promulgated by state Insurance Commissioner John Garamendi that would have restricted insurers from relying on past claims records in choosing whom to accept.

When State Farm stopped writing new homeowners policies in California in April 2002, the company said it had a huge surge in payouts that reduced its reserves against losses. Analysts have said the insurer also was struggling financially because of declines in investment returns.

On Tuesday, an industry critic, the Foundation for Taxpayer and Consumer Rights, said trends in the stock market also could be encouraging insurers to increase sales.

“They don’t want to miss an opportunity to invest new premium dollars in the rising market,” said Doug Heller, a spokesman for the Santa Monica-based group.

Two weeks ago, Safeco, another insurer that had stopped accepting new customers, announced that it was resuming those sales.

State Farm has about 1.4 million homeowners policies in California, and Safeco has about 240,000.

State Farm’s return to writing new policies came after the carrier received cumulative homeowners rate increases of 21.7% last year and an additional 5.7% this year.

Sirola said the company recently had consolidated 66 claims offices in California down to 20 and had closed two major operations centers in a streamlining move.

In recent years, insurers have complained that the amount of claims have jumped, with mold and water damage leading the way.

Although there have been reports of non-renewals of customers making large claims, State Farm says fewer than 1% of its customers are not renewed each year.

Garamendi has been trying to restrict insurance companies’ use of computerized databases that report not only past claims by individuals but also claims history on specific properties by previous owners.

A Sacramento County Superior Court struck down an emergency regulation the commissioner issued on the matter on the grounds that he had exceeded his authority.