A week after winning emergency approval to raise Californians’ home insurance premiums, State Farm is seeking to boost that rate hike even higher to 30%.
On May 13, the state’s largest insurance company got regulator approval to increase rates by an average 17% starting in June. State Farm secured the expedited rate hike after asserting it was in financial distress and expected $7.6 billion in claims arising from the deadly Los Angeles wildfires in January.
The “interim” rate increase, however, was only part of a 30% hike the company asked for in June 2024. To reach the full amount, State Farm filed a request Monday for an 11% increase starting next year, on top of the already approved 17% increase. Since the hikes would happen sequentially, they would have the effect of raising rates by 30%.
State Farm is also requesting to raise rates by 36% for condos and 52% for renters.
The California Department of Insurance said it will hold a public hearing in October to continue gathering information from company officials as they seek to justify the requests.
“State Farm wanting a rate increase doesn’t change the law,” the agency said in a statement. “All rates must be justified so consumers don’t pay more than is required.”
Statewide, the insurer covers roughly 15% of homes, totaling more than 1 million customers.
When State Farm made its initial 30% request last June, the company asked the insurance department to grant a “variance” to raise premiums higher than usual due to its financial outlook. State Farm General, the company’s California-only subsidiary, had issued multiple warnings about its solvency. S&P Global Ratings recently threatened to downgrade the insurer’s credit rating, signaling concerns about its financial strength.
With the June request still pending, the insurer asked regulators to approve the emergency hike after the devastating fires in Los Angeles County. At the recommendation of an administrative judge, Insurance Commissioner Ricardo Lara last week authorized the 17% hike, slightly less than the 22% the company had requested.
In a statement, State Farm said it was “pleased” with Lara’s decision but made clear it would continue pursuing the full 30% increase.
Consumer advocates, however, said regulators should not have agreed to approve the expedited rate hike — the first time an insurer won such approval in California. They called on the insurance department to closely scrutinize the data that State Farm is now providing to justify another increase.
“We’ve already heard from consumers who are outraged that they just got 17% and now they’re asking for more,” said Carmen Balber, executive director of Los Angeles-based Consumer Watchdog.
State Farm’s latest request is the most recent chapter in California’s insurance crisis, as providers have ended coverage for hundreds of thousands of policyholders across the state in recent years amid unprecedented wildfire losses.
California’s insurance rates are closely regulated and, as a result, lower than in many other parts of the country. The insurance industry argues that has left insurers in an untenable situation, even as companies have won approval for repeated rate hikes in recent years.
In an attempt to stabilize the faltering home insurance market, state regulators earlier this year finalized a plan that includes allowing insurers to raise rates based on the growing threat of climate change — long an industry demand — in exchange for expanding coverage in parts of the state with the greatest wildfire risk.
Consumer advocates, however, contend the plan will lead to huge rate increases and lacks the teeth to force insurers to add homeowners.
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