Condo owners and renters could see a larger jump in insurance costs as State Farm General pursues an overall 30% rate increase for homeowner policies in California.
This comes just a week after the company was granted a 17% emergency interim hike, down from the nearly 22% increase it originally requested, following a ruling approved by the insurance commissioner, Ricardo Lara.
State Farm confirmed to the Guardian that it plans to seek an additional 11% rate hike the company had proposed last year.
First reported by the San Francisco Chronicle, State Farm says these increases are necessary due to “severe capital depletion”, especially after the devastating Los Angeles county wildfires.
If approved, the average annual premium could rise by about $600 for homeowners, $163 for condo owners and $30 for renters, the Chronicle reported. A spokesperson for the California department of insurance told the Guardian that a rate hearing on the same request is scheduled to “get to the facts”.
“They want more? We want more data, more transparency, more policyholders served, and more policies written in wildfire distressed areas,” a spokesperson for the department said in a statement. “State Farm wanting a rate increase doesn’t change the law. All rates must be justified so consumers don’t pay more than is required.”
The increase will apply to all of the roughly 1 million homeowners State Farm insures in the state.
The next hearing is scheduled for 20 October.
State Farm General has said that the rate hike intends to help “stabilize” the company’s financial position and ensure its ability to serve Californians over the “long-term”. The company said that the increase was not to cover wildfire losses, but rather a “critical first step” in restoring its overall financial health, which is essential for paying future claims.
“While we are pleased that Commissioner Lara approved the interim rate of 17% for State Farm General Insurance Company, this change only addressed part of the original request of 30% filed in June 2024,” a spokesperson for State Farm General Insurance Company said.
Back in February, State Farm General estimated its direct wildfire-related losses at about $7.6bn, including both reported and anticipated claims.
“We remain deeply concerned about the financial position of State Farm General, as it is difficult to match price to risk in California,” the insurer said in a May update.
In June of last year, the company sought a 30% rate hike for homeowners’ policies, as well as a 36% increase for condo owners and a 52% increase for renters. The sudden increase raised questions about the insurer’s financial stability.
State Farm chose not to renew fire insurance for 1,626 State Farm customers in the Palisades neighborhood in 2024, according to California’s insurance office. They represented about 70% of State Farm’s market share in Pacific Palisades, according to the San Francisco Chronicle.
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“This decision was not made lightly and only after careful analysis of State Farm General’s financial health, which continues to be impacted by inflation, catastrophe exposure, reinsurance costs, and the limitations of working within decades-old insurance regulations,” the insurer said.
The consumer advocacy group Consumer Watchdog said it had urged Lara to reject the emergency interim rate increase during a hearing in April, stating that State Farm General had “failed to meet the legal standard required under California law to justify a mid-proceeding rate hike”.
The group also questioned how fair the proposed settlement was between the department and State Farm. They cited testimony from State Farm’s expert, Dr David Appel, who claimed that the interim rate increase poses “no risk to policyholders”.
“Dr Appel evaluated the settlement from State Farm’s perspective alone,” said William Pletcher, litigation director at Consumer Watchdog. “But $40 or $50 a month is a serious hardship for California families already struggling to stay afloat.”
The already-approved rate hikes will appear on homeowners’ bills at their next renewal date after 1 June. An additional rate increase, if approved, would take effect at each customer’s first renewal in 2026, according to the Chronicle.
