California Regulators Approve Interim Premium Hikes for Homeowners, Renters, and Landlords
Citing extraordinary wildfire-related losses, State Farm has been granted emergency approval to raise insurance premiums for California homeowners and renters beginning June 1, becoming the first insurer in the state to secure such an interim rate increase, as reported by Cal Matters.
The approval, finalized on Tuesday by Insurance Commissioner Ricardo Lara following a judge’s ruling, comes in response to State Farm’s claim that it faces more than $7 billion in payouts tied to the destructive January wildfires in Los Angeles County. The new rates will mean average increases of 17% for homeowners, 15% for renters and condo owners, and 38% for landlords of rental dwellings.
The rate hike was requested under rare circumstances earlier this year, as the company warned of financial distress. Although the California Department of Insurance’s staff supported the proposal, Lara initially withheld approval, requesting additional financial disclosures from State Farm and inquiring whether its parent company, State Farm Mutual, could offer assistance. Ultimately, Lara granted conditional approval and referred the matter to an administrative law judge, who presided over a three-day public hearing in April and issued the final decision.
Consumer Watchdog, a consumer protection group that has voiced opposition to the rate hike from the beginning, its executive director, Carmen Balber, said, “Today’s decision forcing consumers to pay now but allowing State Farm to wait months before having to show its math is a great disappointment for consumers. Voter-approved Proposition 103 says a rate hike shouldn’t come before the rate justification, but that’s what happened here.
Balber added, “State Farm policyholders, many of whom are struggling to get their claims paid by the company after the Los Angeles fires, are now facing double-digit rate hikes. Nevertheless, we will fully defend consumers’ right to fair rates in the upcoming hearings where State Farm will finally have to justify what they want to charge.”
While Lara acknowledged mounting public concern, including complaints about the company’s handling of fire-related claims, he told wildfire survivors during a Zoom meeting over the weekend that the rate increase and the claims dispute are being addressed separately.
The decision has drawn criticism from fire victims and state lawmakers, who argued that the insurer should be investigated, not rewarded with higher rates. Nonetheless, the judge’s ruling emphasized the temporary nature of the emergency approval and stated that State Farm must still justify its full rate-increase proposal at a separate hearing scheduled for next month.
Insurance Commissioner Lara and the court’s ruling may now set a precedent, raising the possibility that other insurers could seek similar emergency rate adjustments in the wake of future natural disasters.
