The California-based Farmers Insurance said on Aug. 28 that it will lay off 2,400 employees, or 11 percent of its workforce, across all lines of business due to macroeconomic challenges facing the industry.
Farmers Insurance said the decision was made following a “thorough evaluation and reduction of operational expenses” conducted across the company. It did not specify when the layoffs would take effect.
Raul Vargas, president and CEO of Farmers Group Inc., said the company had to take decisive actions to better position itself amid the “existing conditions” of the insurance industry and its impact on the business.
“Decisions like these are never easy, and we are committed to doing our best to support those impacted by these changes in the days and weeks to come,” Mr. Vargas stated in a press release.
“As our industry continues to face macroeconomic challenges, we must carefully manage risk and prudently align our costs with our strategic plans for sustainable profitability.
“There is a bright future – for Farmers and for our industry – and it necessarily will look different than the past,” he added.
Farmers Insurance is one of the state’s largest homeowners insurance providers. The company announced last month that it will limit its sales of homeowners policies in California due to “record-breaking inflation, severe weather events, and reconstruction costs.”
The company also decided to stop providing home, auto, and umbrella coverage in Florida to “effectively manage risk exposure,” The Hills reported. Florida is susceptible to hurricanes.
Other insurance industry giants, including State Farm and Allstate, have also pulled back from California’s home insurance marketplace amid increasing wildfire risk and soaring construction costs.
Wildfire Risks
In recent years, California has experienced the largest and most destructive fires in state history.
Some California homeowners already are going without coverage, and a shortage of new policies could make it more difficult to buy a home. A state-run pool that serves as the insurer of last resort for many could face pressure as enrollments surge.
According to the Insurance Information Institute, several insurers have stopped writing new property insurance policies in California due to the increasing number of acres burned in the state in recent years.
“The number of acres burned in California has grown steadily in recent years, as more people are moving into fire-prone areas of the state,” the institute stated on June 5.
“More homes in harm’s way — combined with rising costs of repairing or replacing houses either damaged or lost to fire — leads to increased insured losses. On top of all of this are the underwriting challenges associated with public policy in the state,” it added.
Data released by the California government reveals that the state has reported 4,936 wildfires so far this year, resulting in the scorching of 222,863 acres of land. Last year, California reported around 5,341 wildfires that affected about 143,208 acres of land.
On Aug. 16, rural areas near California’s border with Oregon were issued with evacuation orders after gusty winds from a thunderstorm sent a lightning-sparked wildfire racing through national forest lands. Forest Supervisor Rachel Smith said that the fire moved “extremely quickly.”
“Just in a matter of a couple of minutes yesterday afternoon the fire grew from just 50 acres to nearly 1,500 acres. This is the kind of growth that historically we have not experienced on our forest prior to the last couple of years,” she said.
The Associated Press contributed to this report.
From The Epoch Times
