State Farm is pushing for a new rate increase in California, just a week after receiving approval for a significant hike. The company initially sought a 30% increase but settled for a 17% raise after negotiations. This latest request reflects ongoing struggles due to substantial losses from wildfires in Los Angeles, which have forced the insurer to reconsider its pricing strategies.
Recently, State Farm received the green light for a 17% increase in its homeowners insurance rates, a decision recommended by Administrative Law Judge Karl Seligman. However, California Insurance Commissioner Ricardo Lara still needs to give final approval. The approved terms include a 17% increase for the non-tenant HO-3 line, a 15% hike for renters and condos, and a whopping 38% increase for rental dwellings. In exchange, State Farm has agreed not to nonrenew any policies until the end of 2025 and will inject $400 million into its California operations.
Despite the recent approval, State Farm is not backing down. The company has stated that the overall request for a 30% increase is still on the table and is not cumulative with the 17% hike. A full hearing is expected later this year to discuss this request in detail.
The California Department of Insurance has noted that this is not a new request. The company’s initial filing in June 2024 sought a 30% increase, which was trimmed down after a public hearing. Officials are emphasizing the need for more data and transparency, urging State Farm to provide justification for any further increases.
The wildfires in Los Angeles have had a devastating impact, destroying over 11,500 properties and costing State Farm around $2.5 billion in claims. Overall, the fires have led to 37,749 claims and $12.1 billion in payouts across the state. This has created a challenging environment for insurers, with many pulling back on writing new policies.
Consumer advocacy groups, like Consumer Watchdog, have criticized the rate hikes, arguing they unfairly burden policyholders, especially those still waiting for claims to be processed. They claim that State Farm’s actions will lead to higher costs for consumers without adequate justification.
Adding to State Farm’s challenges, the company is facing lawsuits alleging that major insurers, including State Farm, colluded to limit coverage in high-risk areas, further complicating the insurance landscape in California. As the situation unfolds, many are watching closely to see how it will affect homeowners and the availability of insurance in wildfire-prone regions.