California Rejects State Farm’s Rate Increase Request Amid LA Fire Claims
Authored by Jane Yang via The Epoch Times,
California’s insurance commissioner on Feb. 14 turned down a request by insurer State Farm for an emergency interim rate hike of 22 percent for home insurance, amid a flood of damage claims due to the devastating Los Angeles fires.
“The burden is on State Farm to show why this is needed now. State Farm has not met its burden,” Commissioner Ricardo Lara said in a statement.
Lara said he has scheduled a meeting on Feb. 26 with the insurer to ask questions regarding the company’s rate increase request, according to the commissioner’s office.
The commissioner said he wants State Farm to discuss its financial stability, justification for the rate hike, impacts to policyholders, and transparency in its decision-making, the office said.
State Farm has requested a 22 percent rate increase for non-renter homeowners, 15 percent for renters, 15 percent for condominium unit owners, and 38 percent for rental dwellings, all effective May 1, 2025, for interim rate increases.
State Farm said it was disappointed by the rejection. “This lack of approval sends a strong message to State Farm General about the support it will receive to collect sufficient premiums in the future to protect Californians against the risk of loss to their homes,” a Feb. 14 statement posted on the company website reads.
State Farm said that it has “gone to great lengths to clearly answer the questions outlined by the Commissioner,” and while it is “positioned to handle all of the claims associated with the most recent wildfires,” the company “must seriously consider its options within the California insurance market going forward.”
In a Feb. 3 letter to Lara, State Farm said that as of Feb. 1, the company received more than 8,700 claims and has already paid more than $1 billion to customers related to the Los Angeles fires, and more will be paid in the future.
It also said that “the costs of these fires will further deplete capital” from the company, which could affect its credit rating and harm its mortgage customers.
State Farm said that because the commissioner has not yet approved its request for rate increases submitted last March, it is now asking the agency to “take emergency action” to approve interim rate increases and allow the company “to start collecting additional premiums much more quickly and possibly begin rebuilding its risk-bearing capacity.”
It also claimed in the letter that over the nine-year period ending in 2024, it paid $1.26 in claims and expenses for every $1.00 collected through premium payments, resulting in more than $5 billion in cumulative losses.
In the response letter Lara sent to State Farm on Feb. 14, he said that under the strict review laid out by California Proposition 103, “the burden is on the insurer to demonstrate and support its rate requests.”
According to statistics from Bankrate.com updated Feb. 10, the national average cost of home insurance is $2,258 per year for a policy with $300,000 in coverage. California’s average is $1,429, which is $829…