California rejects State Farm's request for 22% rate hike
State Farm insurance customers worry about affects of requested rate hikes
For the second time in the past six months, State Farm insurance executives, on Monday, requested an emergency rate hike, this time of up to 22%. This comes on the heals of $1B in payouts due to the LA area fires. Some Bay Area customers worry if the state approves the requested hikes, it will mean higher bills and impact progress made building housing for the homeless.
SACRAMENTO, Calif. - The California insurance commissioner on Friday rejected State Farm's request for a temporary 22% rate hike for homeowner policies, as the company deals with claims from the Southern California wildfires.
22% rate hike shot down
What they're saying:
"Under the strict review laid out by Proposition 103, the burden is on State Farm to show why this is needed now. State Farm has not met its burden," Commissioner Ricardo Lara said.
Lara has called a meeting with State Farm to address questions about the insurer's financial condition and the proposed rate hike. The meeting is scheduled for Feb. 26.
"All Californians know from the past 10 years that the risks of wildfire are real and growing. We have experienced first-hand the ravages of a changing climate," Lara said."We are clear-eyed about the work needed to protect our communities. Our decisions must be guided by transparent data and an honest reckoning with the challenges we all face together."
$1 billion in wildfire claims
The other side:
State Farm, California’s largest insurance company, had urged the state to approve the emergency rate hike of 22% for homeowner policies starting in May, after processing nearly 8,700 claims and paying out more than $1 billion to policyholders for the Los Angeles fires.
"The costs of the January 2025 wildfires will further deplete capital from State Farm General,' the company wrote in a Feb. 3 news release. "Capital is necessary so an insurance company can pay for any future claims for the risks it insures."
The Los Angeles County wildfires will be the costliest disaster in the company's history.
In the past, the insurer discontinued coverage for 72,000 homes in California and stopped issuing new policies in the state due to soaring costs, increased risk of catastrophes, and outdated regulations.
The Source: California Department of Insurance