State Farm recently received approval for a 17% rate hike on homeowners policies. (Credit: Diego M. Radzinschi/ALM)
The California Department of Insurance announced Thursday that it is launching a market conduct examination into State Farm and the way it has dealt with claims following the LA wildfires.
The investigation will look at adjuster practices and assess State Farm’s methods for managing claims in a process that will likely take several months. California Insurance Commissioner Ricardo Lara said the investigation comes after complaints from wildfire survivor groups about State Farm’s claims handling.
"Some troubling patterns that my staff will investigate include the frequent reassignment of multiple adjusters with little continuity in communication, inconsistent management of similar claims and inadequate record-keeping or information-sharing among claims teams,” Lara said in a statement. “These issues create unnecessary stress, prolong recovery and erode trust."
The investigation will also look at how State Farm has been handling smoke damage claims. Several wildfire victims have filed lawsuits against the California FAIR Plan and its member insurers, including State Farm, for denial of smoke damage claims.
State Farm, California’s largest insurer, recently received approval for an emergency 17% rate hike on homeowners policies. During a hearing on the hikes, a judge said State Farm was facing “extraordinary financial distress” following the LA wildfires, which damaged more than 16,000 structures in January.
As of February, State Farm said it had paid $1.75 billion in claims and expected to issue roughly $7.6 billion in total claims payments from the fires. Reinsurance will lower its overall losses to about $612 million.
The investigation was applauded by the Insurance Fairness Project and the Extreme Weather Survivors, two groups that have advocated for consumers who allege State Farm has been slow-walking their claims.
“Fire survivors and other State Farm policyholders have been calling for an investigation for months, and until now, all they got was more rate hikes,” said Sophia Wilson, spokesperson for the Insurance Fairness Project, in a statement. “We’re glad that Commissioner Lara has finally started to listen to his constituents. The home insurance crisis cannot be solved on the backs of everyday Californians, and insurers who abuse consumers with delays and denials must be held accountable. It’s time for lawmakers to take this crisis seriously.”
The Extreme Weather Survivors ran ads last month urging Lara to “Stand with families. Not insurance companies.” The ads included Eaton fire survivors who said they’d been mistreated by State Farm.
“Survivors are heroes — they shouldn’t have to fight to get what they’re owed,” said Sierra Kos, co-founder and co-executive director at Extreme Weather Survivors. “But when we get loud, it works. We’re glad the commissioner is finally taking this seriously. Because, the truth is, you can’t rate hike your way out of this — oil and insurance giants can’t keep fueling disasters and then dodging the fallout. This investigation is a win for every community that spoke out and demanded accountability. This moment proves that when we show up for each other, we make change.”
Lara said consumers with specific complaints about State Farm should contact the insurance department so they can be investigated.
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