California Denies State Farm’s Rate Hike Proposal Following LA Fire Claims
The insurance provider indicated that the rate hike is essential to avert further capital depletion, which could impact its credit rating and adversely affect mortgage customers.
On February 14, California’s insurance commissioner rejected State Farm’s request for an emergency interim rate increase of 22 percent for home insurance, amid a surge of damage claims resulting from the catastrophic fires in Los Angeles.
Lara has organized a meeting with the insurer on February 26 to inquire about the rate increase request, according to his office.
The commissioner expressed a desire for State Farm to discuss its financial viability, the rationale behind the rate hike, its effects on policyholders, and the transparency of its decision-making process, as stated by the office.
State Farm has proposed a 22 percent increase for non-renter homeowners, a 15 percent increase for renters, a 15 percent increase for condominium owners, and a 38 percent increase for rental properties, all slated for an interim rate implementation on May 1, 2025.
Related Stories
State Farm asserted that it has “made significant efforts to adequately address the inquiries raised by the Commissioner,” and while it claims to be “fully capable of managing all claims related to the recent wildfires,” the company is contemplating its strategic options in the California insurance market moving forward.
The company has cautioned that “the expenditures incurred from these fires will further diminish its capital,” potentially endangering its credit rating and negatively affecting its mortgage clientele.
State Farm indicated that since the commissioner has yet to sanction its previous rate increase requests from March, it is now urging the agency to “take emergency action” to authorize interim rate increases, enabling the firm to “commence collecting additional premiums more swiftly and possibly rebuild its capacity to manage risk.”
In the letter, State Farm also claimed that over a nine-year span concluding in 2024, it has disbursed $1.26 in claims and expenses for every dollar earned in premium payments, resulting in cumulative losses exceeding $5 billion.
California has kept rates low for many years, notably post-2010, leading to “minimal rate adjustments over an eight-year timeframe,” remarked Rex Frazier, a former deputy insurance commissioner in the California Department of Insurance, during a recent episode of EpochTV’s “California Insider” with host Siyamak Khorrami.
Frazier, now leading the Personal Insurance Federation of California, a legislative advocacy group, remains hopeful about the future of the insurance market in California. “Wildfire remains insurable within California, which contradicts claims indicating that we face an uninsurable future,” he stated.
“We do not require special government initiatives to achieve this,” he added, “but rather a framework that enables companies to accrue sufficient revenue to provide coverage for individuals in high-risk zones, which we have been deprived of for the last 13 years.”
Additionally, on February 14, Lara announced collaborative efforts with state legislators to introduce 10 legislative bills aimed at “protecting consumers … in the realm of wildfire mitigation and recovery.”
The commissioner’s office has yet to provide a comment to The Epoch Times regarding the situation.
