State Farm Asks to Increase California Insurance Prices Again
Based on facts, either observed and verified firsthand by the reporter, or reported and verified from knowledgeable sources.
Newsweek AI is in beta. Translations may contain inaccuracies—please refer to the original content.
California insurer State Farm is asking regulators for another rate hike, less than a week after it was granted permission to temporarily charge an extra 17 percent for homeowners' insurance policies.
The company, the largest home insurer in the state, wants the California Department of Insurance (CDI) commissioner Ricardo Lara to approve an additional 11 percent increase for homeowners, and significant hikes for renters and condo owners, according to The San Francisco Chronicle.
Newsweek contacted State Farm and the CDI for comment on Tuesday outside of regular working hours.
People search through the remains of their home that was destroyed in the Eaton Fire in Altadena, California, earlier this year.
People search through the remains of their home that was destroyed in the Eaton Fire in Altadena, California, earlier this year.Why It Matters
Several major insurers, including State Farm, cut coverage across the state's most at-risk areas over recent years, citing growing costs and rising catastrophe exposure.
Their withdrawals have left California homeowners scrambling for alternatives in a private market with shrinking availability. Many have had no other option but to turn to the state's fire insurer of last resort, the Fair Plan, even though its policies are often less extensive than those offered by private providers.
State Farm says its footing in the state is increasingly shaky and needs to charge more to improve its financial conditions. For California regulators, granting such a request is a difficult choice between shielding homeowners from unreasonable rate hikes and ensuring carriers continue offering coverage in the state.
What To Know
State Farm has long been seeking significant rate hikes in California, where strict regulations have kept premiums artificially low for decades.
In late 2023, the company got the green light to increase its homeowners' policies by an average of 20 percent starting from March 15, 2024. In late June 2024, the company asked for another rate hike of 30 percent for its homeowners' policies, 52 percent for renters, and 36 percent for condo owners.
These requests were still pending when the L.A. County fires broke out in January, affecting thousands of State Farm policyholders in the area.
The insurer said it has received over 12,692 claims related to the blazes and has already paid more than $3.5 billion. It expects to pay a total of $7.6 billion in claims related to the fires.
Following the devastating wildfires, State Farm asked for a temporary emergency rate hike of 22 percent for its homeowners' policies, 15 percent for renters and condo owners, and 38 percent for rental dwellings, claiming the increases were necessary to stabilize the company's weakened financial position.
After a judge's independent review concluded that State Farm was justified in its request, Lara approved the hikes last Tuesday, saying it was crucial to maintain "the integrity" of California's insurance market. These increases will come into effect starting June 1.
What People Are Saying
Deputy Insurance Commissioner Michael Soller said in a statement on Monday: "They want more? We want more — more data, more transparency, more policyholders served, and more policies written in wildfire distressed areas. Wanting doesn't change the law. All rates must be justified so consumers don't pay more than is required."
State Farm said in a statement last week following the regulators' approval of its emergency rate hikes: "We remain deeply concerned about the financial position of State Farm General, as it is difficult to match price to risk in California. As we continue to emphasize in our ongoing interim rate filing, we need immediate rate increases to help stabilize State Farm General's financial condition to be able to serve our California customers for the long-term."
What Happens Next
State Farm will be asked to justify its rate hike requests in a hearing this fall.
If its requests are found to be excessive and unreasonable by a judge, the commissioner could order the carrier to refund policyholders for the emergency hikes already approved, while the additional increases might never be implemented.
Are you a California homeowner? Let me know what you think of State Farm's rate hike requests by contacting me at g.carbonaro@newsweek.com.
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