LOS ANGELES (KTLA)—California Insurance Commissioner Ricardo Lara has rejected State Farm General’s request for a rate hike averaging 22% due to the company’s “dire” financial situation after the deadly and destructive L.A. County wildfires.
”In the request, State Farm seeks an increase for the following, effective May 1, 2025:
22% for Non-Tenant homeowners, 15% for Tenants (Renters), 15% for Tenants (Condominium
Unitowners), and 38% for Rental Dwelling. Under the strict review laid out by Proposition 103,
the burden is on State Farm to show why this is needed now. State Farm has not met its burden,
as I discuss below,” Lara wrote in a letter released Friday.
In the letter, Lara also requested a meeting later this month with company officials and representatives from Consumer Watchdog, a consumer advocacy group, challenging the request.
Companies need Department of Insurance approval to increase rates for home and auto coverage, a process that can sometimes take more than a year. However, the process could move faster if companies claim price hikes are needed.
State Farm General, California’s largest insurer, shared that it has already received over 8,700 claims, has paid out over $1 billion to customers, and expects to pay out “significantly more,” with the fires being the costliest natural disasters in its history.”
The company is asking the state’s Department of Insurance to “immediately approve interim rate increases to help avert a dire situation for the more than 2.8 million policies” issued by the company.
“Insurance will cost more for customers in California going forward because the risk is greater in California. 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,” a statement from the company said.
However, Consumer Watchdog has alleged that the company “seeks to charge customers more not because “it cannot pay wildfire claims, but because it wants to protect its Wall Street credit rating.”
“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 in a news release.
State Farm’s latest rate hike request follows the company’s request to raise rates by 30% for homeowners, 36% for condo owners, and 52% for renters, on average, last June. That request is still pending.
Lara has previously questioned the company’s financial situation, especially after the June rate hike request.
Since 2023, State Farm hasn’t accepted new insurance applications for all business and personal property in California. Since then, other companies have announced similar moves.
