State Farm Requests Emergency Rate Hike Following Wildfires
State Farm General has appealed to California officials for an emergency interim rate increase, citing the “dire” financial strain resulting from the recent Los Angeles wildfires. The company has revealed that this rate increase could average to 22% for California homeowners.
In a letter to the California Department of Insurance, State Farm General explained, “The costs of the January 2025 wildfires will further deplete capital from State Farm General. Capital is necessary so an insurance company can pay for any future claims for the risks it insures.”
State Farm General reported having already received over 8,700 claims, paying out more than $1 billion as of February 1. The company anticipates paying out a “significantly” greater amount. Furthermore, the company issued a strong warning to Californians about the future of insurance in the state, stating, “Insurance will cost more for customers in California going forward because the risk is greater in California.”
The California Department of Insurance expressed that State Farm’s rate filings raise “serious questions” about the company’s financial situation, but no immediate action has been taken. The department maintained their commitment to protecting consumers and the integrity of the insurance market, stating that they will “respond with urgency and transparency to recommend a course of action for Commissioner [Ricardo] Lara.”
Insurance expert Karl Susman noted that California homeowners currently pay less than most other states, and that climate change and wildfire risks have not yet been fully reflected in the market prices. “[State Farm is] telling the Department of Insurance, ‘hey, it’s time. We need to start bringing rates more in line with what the actual risks are here in Southern California in order for us to stay viable in California,’ ” Susman stated, adding, “It’s not realistic for anyone to think that the prices we’re paying to ensure ourselves in this area is not going to go up. The risk is clearly going up.”
In their letter to the state, State Farm indicated, “Over the last nine years, the lack of alignment between price and risk means that for every $1.00 collected in premium, State Farm General has spent $1.26.” The company is also requesting a 15% increase for condo owners and a 38% increase for renters. If approved, these increases would take effect on May 1.
For Gary Gilligan, a homeowner in Auburn, this latest request came after his policy renewal. Even with a firewise community discount, Gilligan’s policy saw a staggering increase. “$5,211.50 due by March 1,” he said, which is an 87% jump from the $3,217 he paid a year before. This increase caused significant personal financial adjustments. “Well, we were planning a trip to Disneyland for my birthday, I’m turning 60, so we ended up canceling that,” Gilligan said, “because we have to pay this extra $2,000 and we don’t have that money right now.”
