State farm was all in on California—until it pulled the plug before the fires

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Subscribe to enjoy similar stories. After the pandemic, most home insurers were fleeing wildfire-prone areas of California. But State Farm was there—and making a huge bet.

It gobbled up market share—and generated substantial commissions for its agents—by insuring high-value homes in the Pacific Palisades and other Los Angeles neighborhoods that many of its competitors rejected as too vulnerable to wildfires. By 2022, State Farm had more than 20% of the California market, dwarfing its competitors. In 2023, the insurer took in $2.7 billion of home-insurance premiums in the state, more than a third higher than its nearest rival, and a 70% increase from five years earlier, according to data from ratings firm AM Best.

But behind the scenes, red flags were emerging, as State Farm faced up to years of internal warnings about its levels of risk. Its own actuaries repeatedly said the California subsidiary’s premiums weren’t high enough and its outside consultants warned of the seriously escalating risk of a devastating fire. Just months before the January conflagration, the insurer slammed on the brakes.

It said it would drop around 30,000 homeowners—including 9,500 in neighborhoods that burned last month, according to an analysis by The Wall Street Journal—and moved to substantially raise premiums. That left thousands of homeowners in fire zones without traditional policies, including Sandra Kaler, whose insurance on her Pacific Palisades house wasn’t renewed by State Farm just weeks before the fire. She was forced to switch to the California Fair Plan, the state’s insurer of last resort, which offers bare-bones fire coverage at typically high rates.

By the morning of Jan. 8, her home had burned to the ground. “It was gone in an