State Farm Seeks Urgent Rate Hike in California
If your home is insured by State Farm, you could soon face a significant increase in your premiums. The insurance giant has requested an “emergency” 22% rate hike for homeowners in California, citing the financial strain caused by the recent Los Angeles County wildfires.
In a letter sent to the California Department of Insurance on Monday, State Farm outlined its “dire” financial situation, prompting the request for an immediate increase. The company is also seeking a 15% rate hike for condo owners and a substantial 38% increase for rental dwellings within the state.
State Farm, the largest insurer in the United States, covers roughly 20% of the premiums in the wildfire-affected areas of Los Angeles County. The company reports having already received over 8,700 claims and paid out $1 billion to Southern California customers.
“State Farm is having trouble remaining profitable in California and a big reason is the claims… The cost of doing business as an insurance company in California, especially for property insurance, has gone up,” explained Kevin Brasler, executive editor of Consumers’ Checkbook. Brasler noted how “when there are claims, it’s more expensive to repair the homes or have to rebuild a home from scratch… construction costs have gone way up.”
However, critics have expressed skepticism about the necessity of the rate hike, questioning State Farm’s justification for the urgency.
“This request is really outrageous for an emergency increase… If the company has numbers to show it deserves an increase, it can go through the regular process. To this point, State Farm has only delayed and refused to respond to requests both from Consumer Watchdog and from the Department of Insurance to prove the rate increase itself was justified,” stated Carmen Balber, Executive Director of Consumer Watchdog.
Balber further argued that State Farm possesses ample financial resources. She pointed to the company’s reported $1.4 billion in homeowners insurance revenue between 2020 and 2022, as well as the $135 billion held by State Farm’s parent company.
“If anyone should be bailing out State Farm in California, it’s the parent company,” Balber asserted. Consumer Watchdog claims that State Farm has transferred billions to its parent company.
“That means the company is buying insurance from its parent company, but not getting any benefit. That is just stealing money from the pockets of California homeowners,” Balber added.
The proposed rate hike requires approval from California’s Insurance Commissioner, Ricardo Lara. In response to State Farm’s announcement, Lara’s office stated, “To protect millions of California consumers and the integrity of our residential property insurance market, the Department will respond with urgency and transparency to recommend a course of action for Commissioner Lara.”
Balber expressed strong disapproval of the proposed increase. “It’s shameful for State Farm to be trying to take advantage of this tragedy and make money on the backs of California homeowners who are trying to recover,” she said.
This request follows a 20% rate increase granted to State Farm in March of last year. The company had also requested a 30% hike last July, which was not approved. This new proposal, if approved, would effectively amend the previous request.
