Homeowners scramble as State Farm cancels 30,000 California insurance policies

Ray Barrios lives in one of the many large single-family homes that line Brentwood’s narrow, winding streets. The community is manicured. Planned. Developed. No “wild urban interface” here. The flammable hills just north of this Los Angeles neighborhood that look like typical tinder piles—open dry grass or trees with dense underbrush—seem distant.

Not far enough, according to the home insurance industry.

Barrios and several of his neighbors are among the 30,000 State Farm customers in California who will begin losing their homeowners insurance starting today. Most of the affected customers live in high-fire risk areas, which in Southern California include parts of Woodland Hills, Pacific Palisades, Bel-Air and Brentwood.

“I understand why insurance companies react this way, because we have experienced real fires,” Barrios says.

When he moved into his home in 2017 with his wife, two toddlers, and two doggies (Ralph and Barkley), fire risk wasn’t really his main concern. Most of the state’s largest and most destructive fires (Thomas, Woolsey, Camp, Mendocino, August Complex) hadn’t happened yet.

But “in the first two years after we moved into our house here in Brentwood, we had to evacuate three times because of wildfires,” he said.

State Farm is the latest company to dump at-risk homeowners. As wildfires become more frequent and severe, insurance companies have begun dropping policies en masse.

More than a major inconvenience for homeowners, it signals a rethinking of how we live — and where we live — in California.

Jonathan Tobis, a Brentwood homeowner and State Farm customer, is considering paying off his mortgage and ditching homeowners insurance. Photo by Caleigh Wells.

Barrios has tried several other insurance companies recommended to him by his neighbors who are still insured. They have all declined. He has a broker looking for him, but they have not found anything yet.

He has until September to present another plan. And his choices are limited.

There’s the truly bold option, considered by his neighbor Jonathan Tobis, which State Farm will abandon later this month: “I seriously considered going without insurance altogether,” he says.

Tobis did the math, and an alternative policy would cost him about $10,000 a year, or about four times what he currently pays.

But giving up your home insurance isn’t that simple.

“I still have a mortgage on this house. And the mortgage companies won’t let you leave without fire insurance,” he said.

This means he will have to pay off the mortgage. He bought the house 24 years ago, so it is not out of the question for him.

But Barrios doesn’t even think about it. He’s only had his mortgage for seven years.

Which means he could be stuck with California’s FAIR plan.

“I know it’s the option of last resort,” Barrios said.

The FAIR plan has been around since the 1960s. It’s a government-backed fire insurance policy if no one else will provide one. It’s designed as a temporary safety net to allow people to stay in their homes until a traditional insurance company takes them on again.

“The FAIR plan provides limited coverage at a higher cost,” says Michael Soller, California’s deputy insurance commissioner. “The FAIR plan covers fire damage, smoke damage and internal explosions. That means if you have a basic FAIR plan, you don’t have liability coverage.”

Additionally, Soller explains, “if you have traditional insurance and your insurance company drops you, and you have to buy the FAIR Plan because no one else will buy you a policy to get the coverage you had before, you have to buy a separate policy at a separate cost.”

As climate change makes wildfires more frequent and intense, insurance companies are less willing to insure homes in high-fire risk areas. As a result, over the past five years, the number of FAIR Plan policies has doubled to more than 365,000 customers. This is no longer just a stopgap solution.

Soller sees this as a problem: “We need to get people out of the FAIR plan and back into traditional insurance. And we need to improve people’s safety. And those two things work together.”

Soller says the solution is to make it easier for residents to strengthen their homes: clearing brush, replacing old equipment and anything else that can make homes flammable. That will make homes less vulnerable to fires and more attractive to insurance companies.

State Farm declined to comment for this article, but Rex Frazier, president of the Personal Insurance Federation of California, said that’s still not enough. “If you want insurance companies to effectively serve a place like Tuolumne County, which is just wooded and dry, or the San Bernardino Mountains, where there’s a bark beetle infestation and the fire conditions are terribly scary … they’re going to lose more money than they make. And ultimately, they’re going to be unable to stay solvent and deliver on their promises.”

He says that until California makes it easier to raise insurance rates, State Farm can no longer afford to cover these homes. So they’re sorting through them. Eliminating the riskiest and most expensive homes saves the most money.

Frazier says when insurance companies need to reduce their risk, they eliminate policies on the riskiest and most expensive homes, like those in Brentwood. Photo by Caleigh Wells.

But questions about insurance costs and affordability for individual homeowners sidestep an even bigger question: Are these high-fire risk areas still too risky to live in?

“The system is not prepared to determine whether a property is economically unsustainable from a climate perspective,” says Marty Walters, a consultant who helps people manage recovery from a massive loss.

Wildfires are not like sea-level rise, she says, which slowly brings flood risks to predictable locations and then remains a constant problem. “If entire communities are destroyed by wildfires, there’s no iteration at all. It’s a switch effect,” she says.

So it’s tempting for insurers and landlords to keep moving forward, hoping that this year won’t be a catastrophic one. But neither they nor government agencies are discussing whether to relocate millions of people in the midst of a housing crisis.

“There’s no analysis that’s done to really think about it objectively. Unfortunately, that’s not how our world works,” Walters says. “I laugh at myself because I’m managing all of these risks and I live in both a flood zone and a fire zone.”

His neighborhood, in a small town northeast of Sacramento, is a lucky place untouched by the Dixie Fire. It’s a very vulnerable place.

And yet, she doesn’t want to leave.

Her three sisters live in the city. In addition, she is the primary caregiver for her 88-year-old mother, who lives across the street.

“Moving at this stage of her life would have a huge impact on her. (…) It would be very hard for me, and I know it would be very hard for her,” she said.

Two of Walters’ sisters have already lost their private fire insurance. They have the FAIR plan. Plus, a house with only one expensive insurance option is hard to sell. So they’re staying put, hoping disaster doesn’t happen.

Tobis, who lives in Brentwood, is semi-retired and has a second home on the coast. Even in the worst case scenario, he will have a roof over his head.

“So if something catastrophic happened here, I would just move to Santa Barbara and stop working,” he said.

His neighbor, Barrios, has fewer choices and cannot leave easily. He has two young children.

“I don’t think I really have a choice. Given the current state of the housing market and interest rates, a lot of people, including us, are stuck at home,” he says.

After so much experience fighting wildfires, he’s confident his family can evacuate safely. Besides, he says, his business is just business. Wildfires don’t worry him that much.

“It’s more the financial worry of not being able to insure the house that bothers me,” he said.