State Farm asks California again to raise homeowner insurance rates by 22%
State Farm asks California again to raise homeowner insurance rates by 22%
State Farm is asking the state of California if it can temporarily raise its homeowner insurance rates because the company says that paying out claims for the Los Angeles wildfires is hurting its finances.
ORINDA, Calif. - State Farm is asking the state of California if it can temporarily raise its homeowner insurance rates because the company says that paying out claims for the Los Angeles wildfires is hurting its finances.
A closed-door conversation between state insurance officials, including California Insurance Commissioner Richard Lara and State Farm occurred in Oakland on Wednesday afternoon.
Lara said the public will know in two weeks whether such a temporary hike will take effect.
What we know:
State Farm wants to raise its rates by about 22% for California homeowners, which would affect about one million people.
In a letter to the state agency, State Farm said it has already paid out more than $1 billion for just a few thousand claims after the destructive LA wildfires.
State Farm said it will eventually pay out $7.6 billion.
Right now, the insurance company says it can pay out what it owes, but its capital is taking a huge hit and that temporary rate hike will help.
What they're saying:
In a statement, State Farm said it needs to "interim rate request" to "continue helping California customers."
The company argues that it's rating on the S&P Global is now at a credit watch "negative," and any further blows could destroy its capital.
Lara said he is considering the idea despite turning it down earlier this year.
He's hoping State Farm may consider committing to expanding its coverage in the state if granted the rate hike.
In the last two years, State Farm opted to stop renewing and writing new policies for California homeowners.
If the rates do go up, the hike will take effect in May.
The other side:
Harvey Rosenfeld, founder of Consumer Watchdog, helped write the laws to protect homeowners from price-gouging, which he is now accusing State Farm of trying to do.
"State Farm isn't trying to hide the ball too much, they're admitting that they're worried about how much money they need to pay out for the LA fires," he said. "They just want more money, because they feel like they don't have enough and that's not a good enough reason."
Rosenfeld also argued that allowing the rate increase would set a bad precedent.
"It's not about their losses that they have to pay out in claims," he said. "It's more about maintaining a credit rating, so then the banks can accept a State Farm policy as collateral when you need insurance to show your bank for a mortgage."