As State Farm seeks to raise rates in the aftermath of the destructive wildfires in Southern California, one consumer advocacy group is asking state officials to step in.
Consumer Watchdog sent a pair of letters to Insurance Commissioner Ricardo Lara objecting to State Farm’s pushing for “an immediate 22% rate increase for homeowners, along with a 15% increase for renters and condo owners and a 38% increase for rental dwellings,” the organization said in a news release.
State Farm seeks to charge customers more not because “it cannot pay wildfire claims, but because it wants to protect its Wall Street credit rating,” the release added.
“However, as the letter states, S&P Global rates State Farm and its parent company, State Farm Mutual which has $194 billion in surplus and reserves, together. They have an AA rating, the second-highest possible rating,” Consumer Watchdog said.
State Farm said their California subsidiary has already received more than 8,700 claims and paid out over $1 billion, with “significantly more” payouts expected.
“Insurance will cost more for customers in California going forward because the risk is greater in California,” the company said in a statement. “Immediate emergency interim approval of additional rates is essential to align cost and risk more closely and enable State Farm General to rebuild capital. We must appropriately match price to risk. That is foundational to how insurance works.”
This isn’t the first time State Farm and other insurers have sought to either raise rates for Californians or refuse to insure them entirely. Even before the fires, Lara noted that “State Farm General’s latest rate filings raise serious questions about its financial condition,” he said in a statement to the Los Angeles Times.
“This has the potential to affect millions of California consumers and the integrity of our residential property insurance market,” Lara added.
Consumer Watchdog, however, argues that State Farm’s financial condition is plenty capable of covering the losses of its California customers.
“Consumers who are struggling to rebuild their lives after the wildfires should not be forced to pay higher premiums to prop up State Farm’s bank accounts,” said Carmen Balber, executive director of Consumer Watchdog. “State Farm has failed to demonstrate that an emergency rate increase is necessary.”
