California officials seem receptive to State Farm Insurance's emergency rate hike request at Oakland hearing

CBS News

09-04-2025

At an Oakland hearing Tuesday, attorneys for State Farm Insurance made their case for an emergency rate hike that could impact insurance rates for millions of Californians.
State Farm -- the state's largest insurer -- is asking California's Department of Insurance for a 17% emergency rate hike.
But first, they will have to convince a judge.
The company has already put in other rate requests over the past year, but this emergency request comes as a direct response to the
deadly Los Angeles County wildfires
in January which destroyed more than 18 buildings -- most of them homes.
State Farm estimates it will have to pay out roughly $7.6 billion to fire survivors. The company says those payouts will deplete its reserves.
A consumer watchdog argues policy holders shouldn't be on the hook.
While there wasn't a lot of drama on the first day of the hearing, it is part of a process that will likely dramatically increase the amount it costs to buy homeowners insurance in California
With catastrophic wildfires becoming commonplace in California, the home insurance market is in crisis. State Farm says it's been slowly losing money for the last ten years. On Tuesday in Oakland, its lawyers sat before Administrative Law Judge Karl Seligman to argue that an interim rate hike is justified to keep the company solvent.
"State Farm General's surplus, which is the money that's available to pay claims, has fallen from about $4 billion in 2015 to about $1 billion in 2024," said State Farm counsel Katherine Wellington. "Following the fires in Los Angeles, State Farm General has estimated that its surplus will decline to about $600 million."
They said that's not nearly enough to pay claims if another disaster should strike. There are even warnings that the company's policies soon may not be acceptable to some lenders for people seeking mortgage loans. The company is asking Insurance Commissioner Ricardo Lara for the emergency rate hike that would be imposed on all State Farm policy holders statewide to refill its cash reserve.
At the hearing, state officials seemed sympathetic to the idea.
"It is not in California consumers' best interest to allow State Farm General, the largest property insurer in California by far with 20% market share, to go bankrupt or to otherwise withdraw from the California market," said California Department of Insurance attorney Nikki Kennedy.
Harvey Rosenfield, founder of the state and national advocacy group
Consumer Watchdog
, argues otherwise. The group was also party to the hearing. Rosenfield said Prop 103, which regulates the state's insurance market, requires that companies first prove that they need rate increases. He says State Farm has been reluctant to do that.
"The way it's been engineered by State Farm, it's a fast track," said Rosenfield. "They want the commissioner to approve their rate increase now, and then figure it out later whether it was justified or not. That's not how the law works in California."
There's reason to be skeptical. State Farm was requesting a 30% increase last June, before the Los Angeles county wildfires. After the fires, they initially reduced that amount to 22%. Now that they're being required to show proof, they announced at the hearing that they've lowered the request to 17%. As a result, Consumer Watchdog attorneys asked the judge to strike the evidence being presented.
"We've been demanding this information for nine months. And last night, on the eve of this hearing, State Farm sent us six documents," said Rosenfield. "We haven't even had a chance to look at it."
However, industry expert Karl Susman told CBS News Bay Area he thinks Consumer Watchdog is just stalling the process.
"Can we just get the facts here?" Susman asked. "If they need the rate increases, show us the proof. Nobody cares if it was submitted an hour late or a day late. If the proof exists, let's see it. Let the insurance commissioner decide what he's going to do."
Lara may have already decided. He gave
provisional approval of the 22% rate hike last month
and said he will let the judge decide if it's justified. At the hearing, the California Department of Insurance's lawyers were clear on the state's position.
"Normal rules don't apply," said Kennedy. "We're on the Titanic and we see the iceberg. Now is not the time to argue about where to put the deck chairs. There is still time, your honor, to turn this ship around. If we don't, over three million Californians are going in the water. And there are not enough life boats."
It's probably not a stretch to compare California's insurance market to a sinking ship. Now the judge will decide if State Farm's claims of poverty actually hold water.