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<\/p>\nState Farm has applied for large rate increases in California, months after the carrier got rate approvals of 7% and 20% earlier this year\u2014adding fuel to a burning homeowners crisis in a state that\u2019s seen an increasing number of carriers pullback or raise rates in the last year.<\/p>\n
The Bloomington, Illinois-based insurer, the largest in California, insuring nearly one-in-five homes in the state, requested a 30% rate increase for its homeowners line, a 52% rate increase for renters and 36% rate increase for condo coverage.<\/p>\n
A growing number of carriers have grown disenchanted with California as larger and more frequent wildfires rear up in the state\u2019s increasingly longer wildfire season. The season ahead doesn\u2019t look like it will give much relief. So far, it\u2019s been far busier for firefighters than last year\u2014and the state is heading into a week of triple digit temperatures and a holiday with fireworks.<\/p>\n
A CalFire official on Monday said there has been a 1600% increase in acres burned this year compared to last year in the same timeframe, and \u201cif the future is any indication of what has occurred already this year, it\u2019s going to be a challenging season for firefighters across the state.\u201d<\/p>\n
The rate hike would impact an estimated 1.2 million homeowners. Consumer advocates say the rates, if approved, would be \u201ca financial blow to many renters and home and condo owners\u201d in California.<\/p>\n
The insurer said rates will help shore up its financial situation following massive losses from wildfires and other natural catastrophes.<\/p>\n
State Farm is \u201cworking toward its long-term sustainability in California,\u201d according to a statement from the company provided in request for a comment for this article.<\/p>\n
\u201cRate changes are driven by increased costs and risk and are necessary for State Farm General to deliver on the promises the Company makes every day to its customers,\u201d the statement reads. \u201cWe continue to look for ways to maintain competitive rates and help our customers manage their risk.\u201d<\/p>\n
The statement notes that rate filings are not final until approved by the California Department of Insurance. It urges customers with questions to speak with their local State Farm agent.<\/p>\n
When reached out to for comment, the CDI\u2019s media relations office emailed a statement to be attributed to California Insurance Commissioner Ricardo Lara.<\/p>\n
\u201cState Farm General\u2019s latest rate filings raise serious questions about its financial condition,\u201d the statement reads. \u201cThis has the potential to affect millions of California consumers and the integrity of our residential property insurance market.\u201d<\/p>\n
The statement promises an investigation into State Farm\u2019s financial situation, including a rate hearing on the rate hike applications if necessary.<\/p>\n
\u201cI want to be clear: Nothing changes today for State Farm policyholders as a result of these filings,\u201d the statement reads. \u201cWe are going to lead with facts to make sure Californians are protected. The Department has made tough decisions in approving major State Farm rate increases to address their financial situation including 6.9% in January 2023 and 20% for homeowners and condominiums signed off by an intervenor group in December.\u201d<\/p>\n
State Farm is the state\u2019s top property\/casualty insurer. AM Best reports the carrier has a 19.9% market share and $2.7 billion in direct written premiums in California.<\/p>\n
Last year, State Farm announced it had stopped accepting new policy applications for property\/casualty insurance<\/a> in California due to increased risks from wildfires and inflation. More recently, State Farm said it would non-renew 30,000<\/a> California homeowners, rental dwelling, and other property insurance policies.<\/p>\n Tokio Marine America Insurance Co. and Trans Pacific Insurance Co., in April announced plans to withdraw from the wildfire-prone state<\/a> entirely starting in July. In June, The Hartford confirmed it will discontinue writing new homeowners policies<\/a> in California.<\/p>\n Other large carriers that have announced a reduced appetite for writing California homeowners insurance include American International Group (AIG) and Chubb.<\/p>\n A new report from Gallagher Re released late last year<\/a> showed the threat of damaging wildfires in conjunction with inflation and pricing challenges has led to a distressed insurance and reinsurance market, particularly in California.<\/p>\n Consumer advocates will likely fight the rate request in intervenor hearings, which are part of the state\u2019s prior approval process under Proposition 103, its long-standing insurance law. Efforts to change the law are under way<\/a>. The law has been blamed by some for making the crisis worse, including by preventing rate requests from being approved quicker.<\/p>\n \u201cState Farm is asking for a massive $1.4 billion more than is justified under the standard rules, so there\u2019s a very high bar to prove that\u2019s necessary,\u201d Carmen Balber, executive director of Consumer Watchdog, said in an emailed response to a request for comment. \u201cSimply because State Farm says it needs an exception to the rules to protect its solvency doesn\u2019t make the case \u2013 the insurer still has to prove the variance it seeks is justified. The size of the rate hike State Farm wants \u2013 30 to 52% \u2013 will be a financial blow to many renters and home and condo owners. Every penny of this request will need careful review.\u201d<\/p>\n The CDI, the insurance industry and others have made several proposals to address the growing homeowners insurance crisis in California.<\/p>\n Lara said he will allow catastrophe modeling to be used in rate regulation<\/a> for wildfires, a move he says will help restore insurance options for Californians. It was the latest phase of Lara\u2019s Sustainable Insurance Strategy<\/a>.<\/p>\n Topics<\/span> California<\/a> Trends<\/a> Catastrophe<\/a> Natural Disasters<\/a> Wildfire<\/a> Pricing Trends<\/a> <\/p>\n<\/p><\/div>\n Was this article valuable?<\/p>\n<\/p><\/div>\n