Homeowners in California could soon face higher insurance premiums. State Farm General Insurance, the state’s dominant home insurance provider, submitted a request to regulators on Monday to raise rates by an average of 22%. The insurer attributes the need for the increase to the financial impact of recent wildfires.
State Farm defended the proposed hikes, emphasizing the escalating risks and financial pressures stemming from recent disasters. “State Farm helps people recover from the unexpected. That is what we are doing in the wake of the wildfires,” the company stated. “As of February 1st, State Farm General (Fire only) has received more than 8,700 claims and has already paid more than $1 billion to customers. State Farm General will ultimately pay out significantly more, as collectively these fires will be the costliest disasters in the history of State Farm General.”
The California Department of Insurance has announced an investigation into the request. “State Farm General’s rate filings raise serious questions about the company’s financial situation…The Department will investigate these rate applications thoroughly to ensure Californians are charged the appropriate justified rates,” the department said.
The request comes approximately one year after the insurer announced it was discontinuing coverage for scores of California policyholders, including over 1,400 individuals in San Diego County.
Ron Fischbeck, a policyholder, recalled, “They started talking about pulling out of California last year. And so as soon as the policy came up, I wrote the check and sent it the whole thing. And I said, ‘OK, if they do pull out, at least I’m covered for the year.’” However, he stated that the company is now canceling one of his policies next month. “I was expecting the renewal here in the next few weeks. Instead, I got a cancellation letter. It’s frustrating,” Fischbeck said.
Nick Reale expressed his concern, stating, “To hear after the fires or other catastrophic things these companies making profits are going to increase coverage or threaten to drop, is to me unconscionable.” Reale shared that his insurance company threatened to drop coverage on his home due to an issue with algae on the roof. He is advocating for increased consumer protections.
State Farm reported that it has already paid out more than $1 billion to customers affected by the wildfires. The company maintains that the rate hike is essential to cover future claims.
Fischbeck, while frustrated by the higher costs, acknowledged, “Things go up. I mean, so the 22% is better than getting dumped and having to find insurance again.”
Pete Moraga, a spokesperson for the Insurance Information Institute, described the current situation as challenging for both homeowners and insurance providers due to heightened risks, particularly related to fire. He provided an analogy to explain the situation. “It’s not just homeowners insurance, you have to understand that all insurance is based on risk. If you have a business in a very high crime area that gets broken into a lot, which we’ve seen a lot, those prices for us are going to go up. So insurance risk rises and our premiums have to rise to meet them.”
Last spring, County Supervisor Terra Lawson-Remer voiced her opposition to State Farm reducing some of its policies. “Families, homeowners, and businesses deserve stability—not skyrocketing rates and broken promises. I stand with San Diegans in demanding that insurers and state regulators take action before even more people are left without coverage. I continue to call on State Farm to be a better neighbor,” she remarked regarding the rate increase request.
