State Farm Insurance has requested a 10.6 percent reduction in California homeowners' insurance rates, the state insurance department said Wednesday.
The reduction will amount to $123 million in savings for 1.2 million California homeowners and renters. The average policyholder would save $103 annually, according to the department.
State Farm Sacramento-based spokesman Bill Sirola confirmed the company is seeking the rate reduction. "The loss cost trends have been very favorable of late," he said.
The rate reduction filing, which must be reviewed by the Department of Insurance before any approval is given, comes on the heels of Insurance Commissioner John Garamendi's June order requiring four major insurers to justify their rates.
An earlier study by the department determined that insurers have been paying far less in claims than they collect in premiums.
"This is good news for State Farm policyholders and for all California insurance consumers," said Commissioner Garamendi.
Noting that USAA sought a decrease earlier this year, the commissioner said he expects even more savings for consumers. "As more large companies file for decreases, others will be forced to follow suit in order to compete."
The commissioner contrasted State Farm's move with Allstate's announcement last week that it would seek a 12.2 percent increase in its homeowners' insurance rates.
In June, the commissioner ordered Allstate, State Farm, Farmers Insurance and Safeco Insurance to justify their rates. The move was prompted by a department study finding that four of the state's largest homeowners' insurers were paying far less than 50 cents of each premium dollar to settle policyholder claims.
The four insurers account for 51 percent of the California homeowners' insurance market.
"As commissioner I want this industry to remain healthy and competitive in California," said Commissioner Garamendi. "However, it is my duty to uphold the law that requires that insurance company profits not be excessive."
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