The Club PUBlication 02/10/2024

State Farm seeks urgent hike in Calif. homeowner rates after L.A. wildfires
Insurance company wants 22% increase.
By SOUMYA KARLAMANGLA The New York Times

SAN FRANCISCO -

State Farm, the largest homeowners insurance company in California, asked state insurance regulators Monday to urgently approve a 22% average rate increase, a worrying sign for an already fragile insurance market in a disaster-prone state.

In recent years, more Californians have struggled to secure affordable homeowners insurance as companies have raised their rates or pulled out of the market altogether as fires and other disasters have become more destructive. Last month's blazes in the Los Angeles region, which destroyed 12,000 homes, have only heightened those concerns as people have weighed whether to rebuild.

State Farm has received more than 8,700 claims from the Los Angeles fires alone and paid more than $1 billion to customers, according to the company. The insurer expects to pay out significantly more, and the fires will be the costliest in the history of State Farm, the company said.

State Farm General, which insures more than 1 million homeowners in California, is operated separately from affiliates that provide auto and life coverage. The company asked state regulators to approve the rate increases on renewals starting in May.

"Insurance will cost more for customers in California going forward because the risk is greater in California," the company said in a statement on Monday. "We must appropriately match price to risk. That is foundational to how insurance works."

The Insurance Commissioner's Office said it would review State Farm's rate increase application. The company already had three pending rate increase filings with the department.

"State Farm General's rate filings raise serious questions about its financial condition," Gabriel Sanchez, a spokesman for the insurance commissioner, said in an email. "To protect millions of California consumers and the integrity of our residential property insurance market, the department will respond with urgency and transparency."
State Farm has steadily tried to reduce its financial exposure in California as disasters have become more costly and frequent in the state. Last year, State Farm announced it would not renew 30,000 homeowners' policies. The previous year, the company announced it would not write any new policies in California.

Carmen Balber, executive director of Consumer Watchdog, questioned State Farm's need for a midyear increase, particularly after the company instated a 20% one in March 2024.

She said State Farm General had spent funds boosting the profits of its parent company, and now was "crying broke."

The company has said that each affiliate was expected to operate on its own and that "capital is not freely transferable."

"We think they're taking advantage of the tragedy to try and squeeze Californians," Balber said. "We do think State Farm is using its size in the market to throw its weight around and try to bully California into a bailout that isn't justified."

Rate increases and policy nonrenewals in California have pushed an increasing number of residents onto a special plan created by state lawmakers in 1968 to cover people who can't get standard home insurance for various reasons.
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The number of homes on that program, the California FAIR Plan, doubled from 2020 to 2024.