State Farm General Insurance Company, California's largest insurer, has announced its plans to non-renew approximately 30,000 property insurance and 42,000 commercial apartment policies in the state. This decision, which affects 2% of State Farm's total policies in California, is aimed at ensuring the company's long-term sustainability.

The 42,000 commercial apartment non-renewals mark State Farm's complete withdrawal from the commercial apartment market in California. The remaining 30,000 non-renewals will impact homeowners, rental dwellings, and other property insurance policies.

According to State Farm, this announcement only applies to customers in California, and those affected will receive notifications between July 3 and August 20.

In a statement, the company emphasized that this decision was carefully analyzed and driven by factors such as inflation, catastrophe exposure, reinsurance costs, and the limitations of working within outdated insurance regulations. State Farm General is committed to maintaining adequate claims-paying capacity for its customers and complying with relevant financial solvency laws.

State Farm also expressed its intention to collaborate with the Department of Insurance, Governor Gavin Newsom, and other policymakers in their efforts to implement reforms that would align insurance rates with risk factors more effectively.

The state's insurance department proposed reforming California's insurance regulations earlier this year. The proposed changes would allow insurance companies to shift from using historical data to catastrophe modeling when determining rates, enabling them to calculate future risk projections more accurately. Additionally, the cost of reinsurance would be passed on to consumers.

These reforms are expected to come into effect by the end of the year. It's worth noting that State Farm had previously announced its decision to stop accepting new insurance applications for all business and personal property in California.

Following State Farm's lead, other companies like Allstate have also announced similar moves in exiting the California insurance market. It remains to be seen if California can employ strategies to attract insurers back to the state in the future.