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Yahoo
a day ago
- Business
- Yahoo
Major insurance company accused of illegal scheme to profit off policyholders: 'Race to the bottom'
California homeowners are suing the state's largest home insurer, claiming that the firm misled them and left them "grossly underinsured" as aggressive and unprecedented wildfires devastated much of Los Angeles, the San Francisco Chronicle reported. What's happening? On January 7, what would become a historical series of wildfires began burning in the Pacific Palisades neighborhood. Within a day, the blaze had consumed several homes. It wasn't fully extinguished until January 31, leaving a trail of destruction and fatalities in its wake. On January 9, NPR questioned whether insurance companies had "enough money" to cover the slew of upcoming claims. State Farm is the largest insurer in California, and on January 10, Newsweek covered a statement issued by the insurer. Although the language has since changed, an archived copy matched what was quoted in the article. "We are here for our customers to help begin the process of recovery," it read in part. "We want our customers to know that, when it is safe to do so, they can and should file a claim." In June, several California policyholders jointly filed suit against State Farm, alleging that the firm intentionally and "grossly" left them underinsured. Plaintiffs further alleged the company engaged in a "multifaceted illegal scheme," designed to "reap enormous illicit profits by deceptively misleading over a million homeowners," per the complaint. Through a series of pricing initiatives and other tactics, the complainants assert that State Farm created a "race to the bottom" for rates, aggressively seizing the largest share of California's market. "Lower coverage limits correspond to more attractive premium rates, but leave homeowners unwittingly exposed to serious underinsurance … This has severely undermined plaintiffs' efforts to rebuild their lives in the aftermath," attorneys for the plaintiffs wrote. Why does the California homeowners' lawsuit matter so much? While they're not technically "weather," wildfires are considered a form of extreme weather, as the extent of the damage in Los Angeles demonstrates. Do you think your home has good insulation? Definitely It's just all right It's good in some rooms Not at all Click your choice to see results and speak your mind. The Los Angeles fires were largely caused by a dry winter, exacerbated by rising temperatures and anomalous weather patterns, according to As the planet heats and seas warm, all forms of extreme weather will intensify and occur more frequently. To add insult to injury, many California homeowners experienced delayed claim processing, if they were able to secure home insurance at all. On top of that, State Farm intends to raise rates in California by 30% to 40% across the board. What's being done about the home insurance crisis? In addition to the lawsuit filed in June, homeowners in Eaton sued insurers for similar reasons in April, seeking relief through the court system. Homeowners were caught off guard by the devastating wildfires, which is why it's important to remain aware of critical climate issues and stay prepared. Join our free newsletter for good news and useful tips, and don't miss this cool list of easy ways to help yourself while helping the the daily Crossword
Chicago Tribune
2 days ago
- Business
- Chicago Tribune
Editorial: Gov. Pritzker and State Farm should stop throwing rhetorical bombs at each other and start negotiating
The governor of Illinois and one of the state's biggest employers are engaged in an unusually heated war of words. Shortly after news dropped last week of State Farm's eye-watering 27% average rate hike on Illinois homeowners insurance customers, Gov. JB Pritzker erupted, accusing the Bloomington-based insurance giant of pulling a fast one. 'These increases are predicated on catastrophe numbers that are entirely inconsistent with the Illinois Department of Insurance's own analysis — indicating that State Farm is shifting out-of-state costs onto the homeowners of this state,' Pritzker said in a statement. 'Hard working Illinoisans should not be paying more to protect beach houses in Florida.' In the insurance world, those are fighting words. State Farm responded with its own statement saying Pritzker had his facts wrong, and that the insurer's rate hike — as shocking as it was — reflected only its experience in Illinois, where hail and wind storms, combined with higher replacement costs, have made its homeowners business here deeply unprofitable. 'Illinois families deserve an honest conversation about insurance economics rather than political rhetoric.' So what we appear to have now are two powerful forces facing off, each effectively accusing the other of being a liar. Not ideal, to say the least. We understand the governor's frustration. The 27% increase, set to take effect Aug. 15, is the largest such one-time hike in memory in Illinois, and State Farm isn't just any old provider. The largest insurer of homes and cars in the land, State Farm is particularly dominant in its home state. For years, it's insured roughly 1 of every 3 Illinois homes. So when State Farm raises annual premiums by hundreds of dollars in one fell swoop, that could well have a negative impact on the state's economy. State Farm is that big of a player. Consumers already are struggling with inflation of all sorts. Insurance — like utility bills, which also are rising sharply this summer — isn't an avoidable cost. When insurance costs rise this much, many consumers have to tighten other parts of their budgets, which hurts businesses whose products are more discretionary. That's not to say, though, that we approve of the governor lobbing such serious accusations at State Farm without simultaneously releasing to the public the evidence backing up the rhetoric. Pritzker referenced a Department of Insurance analysis supporting his allegation. So far, no one has seen that analysis despite journalists' request for it. Likewise, the reference to 'beach houses in Florida' appears to be something of a cheap shot. In 2023, State Farm's homeowners premiums in Florida were two-thirds of its total premiums in Illinois, according to National Association of Insurance Commissioners data. State Farm's homeowners premiums in Texas were 73% more than in Illinois; they were 55% higher in California. Maybe 'cattle ranches in Texas' don't have the same ring as 'beach houses in Florida?' That stated, State Farm executives had to anticipate that a rate hike of this magnitude would provoke a political backlash. While homeowners have seen their insurance bills rise in recent years, whether they use State Farm or another carrier, few could have expected sticker shock at this level, particularly since Illinois doesn't have the same reputation for weather catastrophes as Florida, Texas or California. In California, where devastating wildfires have been coupled with major insurers' pulling back on doing business in catastrophe-prone areas, State Farm moved to raise homeowners premiums by 30% on average. A judge earlier this year agreed to allow State Farm to raise rates by 17%, and the company intends to seek the full 30% increase that it originally sought through continued negotiations with the state's insurance commissioner. That sort of compromise seems to us a reasonable solution to the standoff in Illinois. State Farm could obtain part of its planned increase — say, 15% — and then potentially impose the remainder if its Illinois results don't improve over the coming year. In return, Pritzker might soften his request for state legislation giving our insurance regulators approval authority over future rate hikes, a power they don't have now, which makes Illinois' insurance industry one of the most lightly regulated in the country. These are simply suggestions. There are other avenues to compromise. The point is that State Farm and Pritzker need each other. State Farm is one of Illinois' largest employers and a critical corporate citizen. Its future in Bloomington, a city whose economy is heavily dependent on State Farm, has been the subject of steady rumors over the past decade as the insurer has expanded operations in Texas. Conversely, Illinois' insurance department is the company's primary regulator. Part of the reason Illinois is home to two of the largest insurers in the U.S. (Allstate being the other) is that it's perceived as a good place to be based. Unlike, say, banking, insurance is regulated state by state; a company's home state takes the lead on ensuring it is operated soundly. A decent relationship between the company and state government is consequently essential. Even when conditions get this stormy, cooler heads need to prevail.
Miami Herald
2 days ago
- Business
- Miami Herald
State Farm defends hefty 27.2% hike in Illinois homeowners insurance rates
Challenged by everyone from consumer groups to Gov. JB Pritzker over its imminent 27.2% homeowners insurance rate increase in Illinois, State Farm faces the question: Will it seek to defend its widely criticized decision? The answer: hail yes. Citing more frequent extreme weather events such as wind, hail and tornados, insufficient premiums to cover claims and the rising cost of repairs due to inflation, State Farm said its Illinois homeowners business has seen "unsustainable" losses in 13 of the last 15 years. It needs to raise rates to remain "financially strong," the company said in a statement. "These losses are driven in part by severe weather damaging communities across the state," State Farm said. "No company can absorb such losses forever and still be there for customers when disaster strikes." In 2024, for example, State Farm paid out $1.26 in claims for every $1 premium collected from Illinois homeowners, the insurance giant said. That included $638 million in hail damage claims, second only to Texas. The rate increase, first reported by the Tribune last week, has created a political firestorm for Bloomington-based State Farm, the largest home insurer in Illinois. State Farm is raising homeowners insurance rates in Illinois by a whopping 27.2% beginning Aug. 15, according to a filing with the state last month. The rate hike, one of the largest in the state's history, will affect nearly 1.5 million policyholders. New policyholders will pay the higher rates as of Tuesday. In addition, State Farm is implementing a minimum 1% deductible on all wind and hail losses, raising the out-of-pocket costs for homeowners filing a related damage claim. On Thursday, Pritzker issued a statement expressing concern over State Farm's "unfair and arbitrary insurance rate hike," challenging the methodology used to calculate the increased premiums to be paid by Illinois homeowners. Pritzker said the increases are based on catastrophe loss numbers that are inconsistent with the Illinois Department of Insurance's analysis, concluding that State Farm was shifting out-of-state costs onto Illinois homeowners. In its statement, State Farm said it does not shift costs between states and dismissed Pritzker's claims as "political rhetoric." The insurance company said it has provided information to the state to support its position. "Illinois rates are based on Illinois risk - it's as simple as that - not for losses in other states," State Farm spokesperson Gina Morss-Fischer told the Tribune on Monday. State Farm has been hit hard by recent weather-related losses in other states. For example, the insurance company has received nearly 13,000 claims and paid out more than $4.2 billion to California homeowners who suffered losses during the devastating wildfires that raged across the Los Angeles area in January, according to an update posted last week on its website. While State Farm contends that out-of-state losses do not directly affect Illinois premiums, at least one industry analyst said there is a potential connection. If losses are big enough in one state, insurance companies may have to pay more for reinsurance - the insurance company for the insurance companies - resulting in increased rates for policyholders across the country, according to Shannon Martin, an industry analyst for Bankrate. In addition, as people rebuild from wildfires in California to floods in Florida, the increased costs of everything from labor to materials can deplete resources and make it more expensive to do repairs in other parts of the country, including Illinois, Martin said. "You don't operate in a vacuum, and you can't, because we're all part of a risk pool," Martin said. "When there's loss in one area, everyone's going to feel it in some way, shape or form." The increased frequency of extreme weather events has pushed up homeowners insurance rates across the country by 40.4% over the past six years, according to LendingTree's "State of Home Insurance" report for 2025. Illinois had the seventh highest increase, rising 59.5% between 2019 and 2024, the report found. In February, Northbrook-based Allstate raised homeowners insurance rates by 14.3% for nearly 248,000 Illinois customers. Last year, Allstate raised homeowners insurance rates in Illinois by 12.7%, while State Farm implemented a 12.3% increase. State Farm's latest and likely largest-ever Illinois increase has renewed calls for broader legislation to regulate the rates insurers can charge homeowners. Unlike most states, in Illinois, which is home to both State Farm and Allstate, insurers do not need regulatory approval to raise premiums. Legislation is pending in Springfield that would require regulatory approval of larger rate hikes. "It's time for the General Assembly to act," Abe Scarr, director of Illinois PIRG, a nonprofit consumer advocacy organization, said in a statement. "At a minimum, Illinois should empower the state Department of Insurance to reject or modify excessive rate hikes, a basic consumer protection that residents in almost every other state enjoy." At the same time, increased regulation can precipitate companies to abandon markets where it is no longer profitable to insure homes exposed to more frequent weather events. A December report by the Senate Budget Committee said insurance markets have been destabilized from New England to Hawaii as providers decline to renew homeowners policies. "Having more oversight, on one hand, could really help homeowners, but on the other hand, if carriers don't want to be there, that puts homeowners in a pickle," Martin said. "So it's about finding that balance where people can find affordable and available insurance at a rate that insurance companies are satisfied that they're profitable." Illinois ranked 22nd in average annual home insurance costs at $2,743 per year, according to the LendingTree report. For State Farm, the average annual premium for its 1.1 million non-tenant homeowners policies in Illinois is $1,700, which would project an increase of about $475 per year after the 27.2% rate hike goes into effect, the company said Monday. With renters and condo coverage included, State Farm has about 1.5 million total homeowners policies in Illinois. While homeowners rates are going up, State Farm is offering a bit of good news for Illinois customers this week. On Friday, State Farm's auto insurance rates in Illinois will decrease an average of 5.7%, with some customers seeing reductions in premiums of up to 15%, based on lower projected claims costs, the company said. Copyright (C) 2025, Tribune Content Agency, LLC. Portions copyrighted by the respective providers.
Chicago Tribune
3 days ago
- Business
- Chicago Tribune
Letters: Home insurers in Illinois are not arbitrarily hiking rates
As organizations committed to protecting consumers and promoting a fair, competitive and diverse insurance market, the Illinois Insurance Association (IIA), the American Property Casualty Insurance Association (APCIA) and the National Association of Mutual Insurance Companies (NAMIC) strongly reject claims that insurers are arbitrarily hiking rates or shifting out-of-state costs onto Illinois policyholders. Rates filed by insurance companies in Illinois reflect the rising cost of claims, which is primarily driven by local natural disasters and inflation, and are not influenced by losses in other states. Illinois experienced 120 reported tornadoes in 2023 — more than any other state. These extreme weather events, combined with elevated inflation and high material costs, have dramatically increased the cost of repairing and rebuilding homes. This reality puts enormous financial strain on everyone, including insurers. In 2024, State Farm alone incurred $1.26 in losses for every $1 in premium earned in Illinois. The National Association of Insurance Commissioners, in its most recent profitability report, revealed that homeowners' insurers in Illinois had a significant 8.3% underwriting loss over the last decade and a staggering 30.3% underwriting loss reported in 2023. We are committed to maintaining the state's competitive market and ensuring insurers can continue to fulfill their promises to a State Farm customer, I'm not at all thrilled at the 27% increase in homeowners insurance beginning Aug. 15. On the surface, the Tribune Editorial Board is right to paint State Farm as the bad guy ('State Farm lowers the homeowners insurance boom on Illinoisans,' July 11). But you have to ask why State Farm is doing that. In the past two years, ever since we had a nasty hailstorm, we have had dozens and dozens of eager young people come to our door selling their roofing services. They tell us they will inspect our roof at no cost. They tell us we have roof damage without inspecting it. One offered a drone service to use 'the latest technology' to inspect our roof. And all of them say they will submit the bill to our insurance, which most certainly will cover the cost of a new roof. Who wouldn't want a new roof at little or no cost? Well, guess what. That cost is now being passed along to all of us. Just like the cost of genuine disasters caused by climate change is being passed along to all of us. Maybe the insurance industry does need closer scrutiny. Maybe the roofing industry does, too. And maybe all of us should pay more attention to an offer that sounds too good to be true. Eventually, the cost will catch up with Farm is raising homeowner's insurance about 27% when renewal comes up. State Farm has a duty to explain to Illinois insurance holders the facts behind its rate increase and not hide behind 'no comment.'It might be a little easier to understand the coming rate increases, except when I turn on my TV and get bombarded with commercials filled with rich athletes shilling for State Farm. Maybe the honchos at State Farm should reevaluate these costs, considering they are not hurting for the news that Camp Mystic had pursued exemptions to a federal flood map: In the 1990s, I was a homeowner in the Sonoran Desert city of Tucson, Arizona. Imagine my shock when I was notified by the Federal Emergency Management Agency that my home was determined by its maps to be in a flood plain (not revealed when I purchased my home). I appealed and paid a significant amount to have my home surveyed; the house was 1 centimeter below the level FEMA required. I subsequently paid for FEMA-mandated flood insurance on top of my homeowner's. The flood insurance was more than three times the cost of the homeowner's insurance annually. How was this camp, caring for hundreds of children, granted multiple exemptions?Many thanks to the Tribune and its writer Lily Carey for the excellent and informative article about erosion and the efforts to contain it, along our beautiful Lake Michigan and the related diversity of lake life affected by it ('Shoring the lake,' July 13). I was born and spent the early years of my life just a few blocks from Rainbow Beach. The lake was a major presence and attraction for my family and me.I'm a young person from Naperville who attends Metea Valley High School, and I have felt the brunt of our climate crisis. This past fall, my neighborhood saw detrimental air quality conditions from Canadian wildfires. In the hottest part of summer, searing heat waves led to widespread power outages. This isn't some distant issue. It's urgent, local and deeply personal. I chose to intern at Accelerate Climate Solutions, a local nonprofit dedicated to advancing clean energy and climate justice. This summer, we're creating space for youth voices and creative expression to lead the conversation. On July 21, we're hosting a student panel at the Naperville Municipal Center where young climate leaders will share their lived experiences, ideas and solutions. On Aug. 2, our student-led climate art gallery 'The World We Inherit' opens in downtown Naperville, featuring original art and active demonstrations. These projects reflect what climate leadership can look like: community-driven and grounded in justice. I've been working hard to make our community more sustainable, but this isn't a one-person job. Working together, Naperville does have the power to lead, but only if we choose to listen, act and uplift the next the country, Americans have their heads stuck in the sand while the tide gets higher and higher. Week after week, one natural disaster after another slams people from coast to coast, and all anyone can say is that these are 'once-in-a-lifetime' events while they point fingers at someone else's supposed failure to recognize, warn and do something to prevent them. Yes, Texas' Hill Country has flooded in the past. But it's never rained so much for so long and caused so great a flood. Sure, tornadoes are to be expected across the Central Plains. But never so many with such great force. Of course, the summers are hot. But not with so many sustained record-breaking heat waves. And let's not forget the millions of forest acres going up in smoke. The ultimate result is people drown and lose their homes, and we just watch in amazement the national news. When will people face the reality that we are the cause of these things and that we all must do whatever is needed to stop pumping carbon and methane into our atmosphere if there is any hope of altering the ever worsening path the entire world is on?
Yahoo
3 days ago
- Business
- Yahoo
State Farm defends hefty 27.2% hike in Illinois homeowners insurance rates
Challenged by everyone from consumer groups to Gov. JB Pritzker over its imminent 27.2% homeowners insurance rate increase in Illinois, State Farm faces the question: Will it seek to defend its widely criticized decision? The answer: hail yes. Citing more frequent extreme weather events such as wind, hail and tornados, insufficient premiums to cover claims and the rising cost of repairs due to inflation, State Farm said its Illinois homeowners business has seen 'unsustainable' losses in 13 of the last 15 years. It needs to raise rates to remain 'financially strong,' the company said in a statement. 'These losses are driven in part by severe weather damaging communities across the state,' State Farm said. 'No company can absorb such losses forever and still be there for customers when disaster strikes.' In 2024, for example, State Farm paid out $1.26 in claims for every $1 premium collected from Illinois homeowners, the insurance giant said. That included $638 million in hail damage claims, second only to Texas. The rate increase, first reported by the Tribune last week, has created a political firestorm for Bloomington-based State Farm, the largest home insurer in Illinois. State Farm is raising homeowners insurance rates in Illinois by a whopping 27.2% beginning Aug. 15, according to a filing with the state last month. The rate hike, one of the largest in the state's history, will affect nearly 1.5 million policyholders. New policyholders will pay the higher rates as of Tuesday. In addition, State Farm is implementing a minimum 1% deductible on all wind and hail losses, raising the out-of-pocket costs for homeowners filing a related damage claim. On Thursday, Pritzker issued a statement expressing concern over State Farm's 'unfair and arbitrary insurance rate hike,' challenging the methodology used to calculate the increased premiums to be paid by Illinois homeowners. Pritzker said the increases are based on catastrophe loss numbers that are inconsistent with the Illinois Department of Insurance's analysis, concluding that State Farm was shifting out-of-state costs onto Illinois homeowners. In its statement, State Farm said it does not shift costs between states and dismissed Pritzker's claims as 'political rhetoric.' The insurance company said it has provided information to the state to support its position. 'Illinois rates are based on Illinois risk — it's as simple as that — not for losses in other states,' State Farm spokesperson Gina Morss-Fischer told the Tribune on Monday. State Farm has been hit hard by recent weather-related losses in other states. For example, the insurance company has received nearly 13,000 claims and paid out more than $4.2 billion to California homeowners who suffered losses during the devastating wildfires that raged across the Los Angeles area in January, according to an update posted last week on its website. While State Farm contends that out-of-state losses do not directly affect Illinois premiums, at least one industry analyst said there is a potential connection. If losses are big enough in one state, insurance companies may have to pay more for reinsurance — the insurance company for the insurance companies — resulting in increased rates for policyholders across the country, according to Shannon Martin, an industry analyst for Bankrate. In addition, as people rebuild from wildfires in California to floods in Florida, the increased costs of everything from labor to materials can deplete resources and make it more expensive to do repairs in other parts of the country, including Illinois, Martin said. 'You don't operate in a vacuum, and you can't, because we're all part of a risk pool,' Martin said. 'When there's loss in one area, everyone's going to feel it in some way, shape or form.' The increased frequency of extreme weather events has pushed up homeowners insurance rates across the country by 40.4% over the past six years, according to LendingTree's 'State of Home Insurance' report for 2025. Illinois had the seventh highest increase, rising 59.5% between 2019 and 2024, the report found. In February, Northbrook-based Allstate raised homeowners insurance rates by 14.3% for nearly 248,000 Illinois customers. Last year, Allstate raised homeowners insurance rates in Illinois by 12.7%, while State Farm implemented a 12.3% increase. State Farm's latest and likely largest-ever Illinois increase has renewed calls for broader legislation to regulate the rates insurers can charge homeowners. Unlike most states, in Illinois, which is home to both State Farm and Allstate, insurers do not need regulatory approval to raise premiums. Legislation is pending in Springfield that would require regulatory approval of larger rate hikes. 'It's time for the General Assembly to act,' Abe Scarr, director of Illinois PIRG, a nonprofit consumer advocacy organization, said in a statement. 'At a minimum, Illinois should empower the state Department of Insurance to reject or modify excessive rate hikes, a basic consumer protection that residents in almost every other state enjoy.' At the same time, increased regulation can precipitate companies to abandon markets where it is no longer profitable to insure homes exposed to more frequent weather events. A December report by the Senate Budget Committee said insurance markets have been destabilized from New England to Hawaii as providers decline to renew homeowners policies. 'Having more oversight, on one hand, could really help homeowners, but on the other hand, if carriers don't want to be there, that puts homeowners in a pickle,' Martin said. 'So it's about finding that balance where people can find affordable and available insurance at a rate that insurance companies are satisfied that they're profitable.' Illinois ranked 22nd in average annual home insurance costs at $2,743 per year, according to the LendingTree report. A 27.2% rate increase would add about $746 per year to that total for Illinois homeowners who have State Farm insurance. While homeowners rates are going up, State Farm is offering a bit of good news for Illinois customers this week. On Friday, State Farm's auto insurance rates in Illinois will decrease an average of 5.7%, with some customers seeing reductions in premiums of up to 15%, based on lower projected claims costs, the company said. rchannick@ Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
