State Farm predicts the number of policies issued in California will fall by one million by 2028 as the insurance giant struggles financially and pulls out of the Golden State.

The insurer's property insurance policies, which include home insurance, could fall from 3.1 million at the end of 2023 to 2 million by the end of 2028, according to a Sept. 10 filing with the California Department of Insurance.

Since May 2023, State Farm has stopped writing new homeowners insurance in the state because the threat of wildfires and rising construction costs have caused the company's liabilities to skyrocket.

The decline noted in the filing includes both planned non-renewals and natural fluctuations as policyholders decide to cancel or switch their coverage.

Amy Bach, executive director of United Policyholders, an insurance consumer advocacy group, said it's possible those forecasts could change and could eventually lead State Farm to increase the number of policies in the state, especially if the state Department of Insurance removes some of the implements reforms that it has proposed to the insurance market. This includes speeding up the review process for insurers seeking rate increases and allowing them to factor the projected costs of future wildfires and disasters into their rates. Currently, insurers can only set insurance prices based on historical models – which consumer advocates say makes their models transparent.

“The insurance commissioner has said that he expects the market to reopen in 2025 and that we will see many more insurers willing to write more policies in the new year,” Bach said. “So we can see this as more bad news in 2024 and hope 2025 will be better.”

State Farm is California's largest home insurer, insuring one in five homes across the state. This year, the company also told 72,000 policyholders that it would not renew their coverage starting in July.

State Farm did not respond to a request for comment on the projections, but said non-renewals represent just over 2% of State Farm's policy count in California.

The company is currently applying to the California Department of Insurance to approve a plan to increase rates statewide by 30% – after raising average rates for homeowners by 20% back in March – to protect the insurance company from bankruptcy.

The company could have fewer people canceling their policies if the proposed rate hikes aren't as steep, said Carmen Balber, executive director of Consumer Watchdog, which closely monitors the insurance industry.

“That could change if we can get in the way of this huge rate hike,” she said.