State Farm insurance office. Photo: Diego M. Radzinschi/ALM
Consumer Watchdog wants the California Department of Insurance to reject State Farm’s emergency rate hike request ine wake of the LA County fires, saying the appeal is not because the company can’t pay the wildfire claims, but because it wants to protect its Wall Street credit rating.
State Farm is seeking an immediate 22% rate increase for homeowners, along with a 38% increase for rental dwellings and a 15% increase for renters and condo owners.
In a letter sent to California Insurance Commissioner Ricardo Lara, Consumer Watchdog said the rate hike request lacks justification and is an attempt to bypass the state’s consumer protection laws.
According to Consumer Watchdog, S&P Global rates State Farm and its parent company State Farm Mutual together with an AA rating — the second-highest possible. Combined, the entities represent $194 billion in surplus and reserves.
“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 at Consumer Watchdog. “State Farm has failed to demonstrate that an emergency rate increase is necessary.”
Consumer Watchdog’s analysis of State Farm’s filings found:
- No evidence that wildfire claims will reach the $7 billion State Farm suggests.
- $4.4 billion in reserves and surplus already available to cover claims.
- Up to $9 billion in reinsurance commitments from State Farm’s parent company after the company pays $250 million in claims per event, although details remain undisclosed.
- No explanation for why its parent company, State Farm Mutual Automobile Insurance Company, with $194 billion in surplus and reserves, cannot provide support to its affiliate, as happened in Texas.
On Feb. 3, State Farm told PropertyCasualty360.com it had already received 8,700 claims and paid over $1 billion to customers after the California wildfires.
State Farm insures roughly 250,000 homes and 880,000 automobiles in LA County. The company insures over one million homes and more than four million autos across the state.
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