State Farm is seeking to raise home insurance premiums by an additional 11% in California, following an already approved 17% increase earlier this month. The sequential rate hikes would effectively boost rates by 30%. The insurance giant made the request on Monday, aiming to start the new increase next year. This move comes after State Farm received emergency approval for the 17% rate hike, which was justified by the company citing financial distress due to the devastating Los Angeles wildfires in January.
Background on State Farm’s Rate Hike Requests
State Farm initially requested a 30% rate hike in June 2024 but has since broken it down into separate requests. The company had warned about its solvency issues with its California-only subsidiary, State Farm General. S&P Global Ratings even threatened to downgrade State Farm’s credit rating due to concerns over its financial strength.
Public Hearing and Regulatory Response
The California Department of Insurance is set to hold a public hearing in October to review State Farm’s latest request. “State Farm wanting a rate hike doesn’t change the law,” the agency stated. “All rates must be justified so consumers don’t pay more than is required.” Consumer advocates are calling for close scrutiny of State Farm’s data to justify the additional increase, expressing outrage that the company is seeking more after the recent 17% hike.
Impact on California Homeowners
State Farm covers approximately 15% of homes in California, totaling over 1 million customers. The potential rate hikes have raised concerns among consumer advocates, who argue that the insurance industry’s repeated requests for rate increases are unsustainable for many homeowners. California’s insurance rates are closely regulated and generally lower than in many other parts of the country, which, according to the insurance industry, has left insurers in a difficult financial situation.
Broader Context of California’s Insurance Crisis
State Farm’s latest request is part of the ongoing insurance crisis in California, where providers have ended coverage for hundreds of thousands of policyholders due to unprecedented wildfire losses. In response, state regulators have finalized a plan to allow insurers to raise rates based on climate change risks in exchange for expanding coverage in high-risk wildfire areas. Consumer advocates, however, are concerned that this plan will lead to significant rate increases without effectively forcing insurers to cover more homeowners.
In the Bay Area, insurers participating in the new plan will be expected to write more policies in high-risk areas such as Marin, Napa, and Santa Cruz counties. The plan also includes areas like the East Bay Hills and Los Gatos, where insurers will need to offer new policies for fire-risk homes.
