The Los Angeles County fires, according to State Farm General, California’s largest home insurer, have caused the company to be in dire financial precarity, and State Farm General requested an average rate increase of 22 % on Monday.
According to the insurer, which is a division of State Farm Mutual Automobile Insurance Co. of Bloomington, Illinois, it has already received at least 8,700 claims and paid customers more than$ 1 billion. The fires are among its most expensive natural disasters in its story, so it anticipates paying out” considerably more.”
In a letter to state Insurance Commissioner Ricardo Lara, the company wrote that “you can have a very significant impact on ( State Farm General’s ) ability to continue operating in California by approving the requested interim rate changes.”
The company is also requesting rate increases of 38 % for rental properties and 15 % for tenants, with effect on May 1.
State Farm claimed the most recent request is important to repair the business’s capital base, so it won’t have to “further restrain” the ability of the company to offer home insurance in the state. Ratings in the healthcare sector have stated that they anticipated premium increases as a result of the fires.
The California-based employer reported losses of$ 2.8 billion, including gains from investment income, over the nine-year period ending last year. State Farm General’s economic grade was also noted by AM Best last month. The business said it will have access to reinsurance it purchased from its parent to compensate losses resulting from the Los Angeles-area flames.
State Farm General, which had a 20 % market share of the 2023 homeowners insurance industry, insures about 1 million people in the position and has 1.8 million additional policies in place.
The price increase that is being proposed is likely to be contentious. The company filed for a 30 % rate increase in June for its homeowners polices, a 36 % increase for condo owners, and a 52 % increase for renters. State officials were taken by surprise when Lara claimed that the request raised” significant questions about its fiscal condition.”
That demand for a price increase is still pending. If the office approves lower rate increases than the department requested last year, State Farm said it will refund customers who pay the time emergency rates.
The homeowner rates in the company previously received a 6.9 % increase in January 2023 and a 20 % increase that became effective in March of last year.
The Department of Insurance said on Monday in response to the request,” The office will respond with urgency and accountability to propose a course of action for Commissioner Lara,” the Department of Insurance said in response to the request.
The office added that any price increase would only be approved if it was in accordance with Statement 103, the 1988 ballot initiative that gave the director the authority to examine, adjust, and reject proposed rate increases.
Consumer Watchdog, a group based in Los Angeles, disputed that State Farm General was in financial trouble, claiming that the business had”$ 134 billion in the bank” and that it had made$ 1.4 billion in underwriting profits between 2020 and 2023.
California people recovering from a disaster doesn’t fall on the backs of State Farm’s lender accounts, it said.
AM Best gave State Farm Group, which is led by State Farm General’s family business, a higher monetary standing in December.
State Farm General announced in March that it would no longer renew the 72, 000 house, apartment, and other property policies in California due to rising reconstruction costs, rising wildfire risk, and antiquated state regulations.
That followed the state’s selection in May 2023 to stop writing new enterprise, homeowners, and other private property and casualty coverage, with the exception of personal auto coverage.
Last month, following the L. A. range. State Farm changed its decision after state fires became apparent and said it would give renewals to any policyholders impacted by the Palisades, Eaton, and various region fires whose policies had not expired prior to the fires ‘ start on January 7.
When the company announced the nonrenewals last year, it estimated that it would use around 70 %, or 1,100, of the 1, 626 home plans it had in Pacific Palisades ‘ primary ZIP Code.
Eventually, it extended the registration present to any policyholder with the same conditions. The business claimed to have about 250, 000 home policyholders in the region.
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Los Angeles Times 2025
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