Tech and real estate entrepreneur Peter Rex reacted to State Farm's decision to cease home insurance applications in California, predicting there was an "unspoken reason" the firm made its decision. Rex joined "Fox & Friends Weekend" to discuss why he doesn't "fully buy" the notion that the company made the move on economic grounds.
PETER REX: This is a big problem, and I also… think State Farm, I read their release on their own website just to get directly to the horse's mouth here, and I don't fully buy it… The reasons they give are all reasons that are cost-related reasons… Inflation costs, catastrophic events, reinsurance costs going up. All of these things can be passed on to the consumer by the insurance carrier… I would note one of our technology companies is insurance tech business, and we're still licensed in California, where we also do business. And I had run an actual business and lived out in California area as well and San Francisco before we moved out to Texas. And I think that the pretext here, these other reasons, there are real reasons, but I think there's an unspoken reason here, and that reason is California is a very difficult place to do business. And I bet you that State Farm said, you know what, we're done with this. We're going to we're going to go ahead and pull out and we're going to give reasons that are… generally acceptable and true and legitimate, but we're not going to state the reason that California just makes it a very difficult place for a business to operate.
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The State Farm General Insurance Company will no longer accept new applications for property insurance and other policies in California, citing "historic" increases in construction costs and inflation," the company said Friday.
Beginning Saturday, the Illinois-based insurance group will cease to accept applications for business and personal lines property and casualty insurance. The move doesn't impact personal vehicle insurance.
"State Farm General Insurance Company made this decision due to historic increases in construction costs outpacing inflation, rapidly growing catastrophe exposure, and a challenging reinsurance market," the company said in a release. "The Department of Insurance is focused on the safety of our homes and communities."
The insurance company said actions are necessary to improve its financial strength. State Farm agents in California will continue to serve existing customers, it said.
A spokesperson for the California Department of Insurance told Fox Business it is committed to protecting customers.
"The factors driving State Farm’s decision are beyond our control, including climate change, reinsurance costs affecting the entire insurance industry, and global inflation," the spokesperson said.
California has some of the most expensive housing costs in the nation amid a shortage that many say has exacerbated the homeless crisis up and down the state. The state plans to spend about $30 million to build 1,200 small homes.
FOX Business' Louis Casiano contributed to this report.
