State Farm Approved for Unprecedented Rate Hike

Three months after first making the request, California’s largest insurer received approval Tuesday to temporarily raise its rates following the deadly Los Angeles County wildfires in January, writes CalMatters’ Levi Sumagaysay.

Starting June 1, State Farm can hike up its rates by an average of 17% for homeowners, 15% for renters and condos and 38% for rental dwellings. The insurer said it needed emergency interim rate increases “to help avert a dire situation” for its customers and for California’s strained insurance market.

Besides getting the final sign-off from California Insurance Commissioner Ricardo Lara, State Farm also had to get approval from an administrative law judge, Karl-Fredric Seligman.

• Seligman, in his decision: “Taken as a whole, it represents a fundamentally fair, adequate, and necessary measure — effectively functioning as a rescue mission to stabilize State Farm’s financial condition while safeguarding policyholders.”

Seligman’s decision also addressed the possibility that this approval could lay the groundwork for other insurers to request emergency interim rate increases following major wildfires.

The agreement between State Farm and the insurance department does come with a few strings: State Farm has agreed to secure further financial assistance with a $400 million loan from its parent company, and it promised to hold off on policy non-renewals through the end of the year.

Lawmakers and L.A.-area wildfire survivors are also pressuring the insurance department to investigate State Farm for its delayed handling of some claims, which they have argued is reason enough to reject or delay the rate request. But during an online meeting over the weekend with survivors, Lara said the request and the claims complaints were separate issues.

After the rate approval, some survivors criticized the move.

• Joy Chen, leader of the Eaton Fire Survivors Network: “That’s exactly the problem. Approving this rate hike without reviewing State Farm’s conduct would send a chilling message to every Californian: You can pay your premiums — but don’t count on your insurer when disaster strikes.”

Read more here.

CalMatters.org is a nonprofit, nonpartisan media venture explaining California policies and politics.