A police vehicle drives past active fire during the Palisades Fire in the Pacific Palisades neighborhood of Los Angeles, California, US, on Tuesday, Jan. 7, 2025. A fast-moving wildfire ripped through an affluent neighborhood in Los Angeles, forcing thousands of people to evacuate as the region braced for a brutal wind storm that could last well into the weekend. Photo: Kyle Grillot/Bloomberg
California Insurance Commissioner Ricardo Lara has rejected State Farm’s emergency request for a rate hike after the LA County wildfires, saying the company has not shown why the increase is needed.
In a letter to State Farm dated Feb. 14, Lara said, “State Farm has not met its burden,” and requested the carrier answer critical questions about its financial condition and proposed rate hikes.
Commissioner Lara’s questions include:
- What, if anything, has changed for State Farm between June 2024 and now that necessitates emergency relief?
- In the absence of non-wildfire catastrophic losses in 2022 and 2023, how does State Farm explain the significant decrease in its policyholder surplus?
- What has State Farm done to prevent its surplus from further deterioration between May 2023 to present besides shed policyholders through ceased writings and nonrenewals?
- Has State Farm provided adequate documentation to the Department to support the current rate increase request for each line of business?
- Other than rate increases, what other plans does State Farm have to address its financial challenges? For example, would State Farm’s parent company, State Farm
- Mutual Automobile Insurance Company, be willing or able to provide financial support to State Farm as it has in other similar situations?
- What is State Farm doing to manage and restore its financial position given its statement that rate increases alone will not be sufficient?
- How would granting an emergency rate impact State Farm’s business decisions to pause writing of new residential coverage and non-renew policies?
In a statement sent to PropertyCasualty360.com, State Farm said, “We are very disappointed the Commissioner ignored his department’s recommendation to take the critical and necessary step to approve State Farm General’s request for interim rate increases associated with our June 2024 filings.”
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.
“This lack of approval sends a strong message to State Farm General about the support it will receive to collect sufficient premiums in the future to protect Californians against the risk of loss to their homes, property, and other claims,” State Farm continued. “We have gone to great lengths to clearly answer the questions outlined by the Commissioner. While we’re positioned to handle all of the claims associated with the most recent wildfires, State Farm General must seriously consider its options within the California insurance market going forward.”
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.