State Farm General, California’s top home insurer, has received approval to increase its home insurance rates statewide, leading to strong objections from consumer advocates.
A judge and Insurance Commissioner Ricardo Lara approved the hike, which will see average home insurance premiums rise by 17 percent.
Condominium owners and renters can expect average rate hikes of 15 percent, while rental property owners will face an even steeper increase of 38 percent.
‘It is unimaginable that State Farm would implement this increase after numerous families in the region were impacted by wildfires,’ stated Los Angeles resident Andrea Smith, referring to the fires that devastated areas of the city earlier this year.
The rate hike follows a year-long standoff between the insurer and the state, which regulates premium increases.
Last year, State Farm threatened to withdraw from California entirely unless it was allowed to raise prices. Originally, the company proposed even steeper hikes.
The newly approved increases — the second in just two years — will begin hitting policyholders as early as next month.
State Farm says the move is necessary to avoid financial collapse, pointing to billions in payouts tied to recent wildfires.
State Farm General has been given the green light to raise its California insurance prices
Experts had warned that price hikes were inevitable as insurers faced massive payouts for wildfires that severely damaged the Pacific Palisades neighborhood and thousands of other homes across Los Angeles County.
State Farm says the latest round of price increases is necessary to stop the company going bust, especially in the wake of the devastating Los Angeles fires which damaged its bottom line further.
State Farm has so far received nearly 12,700 claims from wildfire victims, and has paid customers more than $3.5 billion, the San Francisco Chronicle reported.
A spokesperson for the company described the increase as ‘a critical first step for State Farm General’s ability to continue serving our California customers.’
‘SFG still must continue building sufficient capital for the future,’ it added.
Judge Karl-Frederic J. Seligman who approved the insurer’s case, said the deal ‘represents a fundamentally fair, adequate, and necessary measure.’
He added that it is ‘effectively functioning as a rescue mission to stabilize State Farm’s financial condition while safeguarding policyholders.’
Although regulators have approved the price rise, a public hearing has also been instigated at which State Farm will have to prove its finances are in a state that justifies the enormous price rise for consumers.
State Farm has been granted permission by a judge and Insurance Commissioner Ricardo Lara to to raise its home insurance prices by an average of 17 percent
State Farm General is the largest home insurer in California by far, with more than 2.8 million policyholders in the state (Pictured: An aerial view of homes destroyed in the Eaton Fire)
Pictured: A firefighting helicopter dumps water on the Palisades Fire, the largest of the LA fires
‘We are in the business of helping people recover, and that’s exactly what we’re doing right now to those impacted by the fires,’ State Farm CEO Jon Farney said earlier this year
As part of the agreement State Farm will also not drop the additional customers it had threatened to cut until at least the end of the year.
This includes keeping all its customers in Los Angeles County for at least a year.
The ruling has faced fierce pushback from consumer advocacy groups including Consumer Watchdog.
‘Today’s decision that would make consumers pay now but allow State Farm to wait months before having to show its math is a great disappointment for consumers,’ the group’s executive director said in a statement.
‘Voter-approved Proposition 103 says a rate hike shouldn’t come before the rate justification, but that’s what happened here.’
Other insurance companies, including Allstate and Farmers Direct, have also limited cover or stopped doing business entirely in the Golden State.
This led to California introducing new regulations aimed at easing the state’s home insurance crisis – days before the deadly fires broke out.
