State Farm looking to increase rates for homeowner policies by 22% following LA fires
LOS ANGELES - State Farm, California's largest insurer, filed a request with the state Monday for an emergency 22% rate hike for homeowner policies, calling the increase essential to stave off a "dire situation" for customers and the insurance industry in the state.
In the wake of the LA wildfires, State Farm officials said the company has already received more than 8,700 claims and has paid out more than $1 billion.
"We know we will ultimately pay out significantly more, as these fires will collectively be the costliest in the history of the company," State Farm President/CEO Dan Krause and other company leaders wrote in a letter to California Insurance Commissioner Ricardo Lara. "Although reinsurance will assist us in paying what we owe to customers, the costs of these fires will further deplete capital from (State Farm)."
The company requested immediate approval of interim rate increases effective May 1 amounting to 22% for homeowners, 15% for renters and 38% for rental dwellings.
State Farm announced in May 2023 that it would stop writing new policies in California, and the following year it said it would not renew 72,000 existing policies, including 29,000 homeowner policies. The company recently said, however, that it would be offering renewals to wildfire-impacted homeowners.
"The high concentrations of risk covered by (State Farm) in the fire footprint will generate a direct loss many times larger than the company's pre-event surplus," Krause wrote. "(State Farm's) already stressed financial position will be further weakened, even after accounting for billions of dollars in anticipated recoveries from a prudently robust reinsurance program that includes State Farm Mutual Automobile Insurance Company as the primary reinsurer."
State Department of Insurance spokeswoman Gabriel Sanchez said in a statement to Southern California News Group that the rate-hike request raises "serious questions" about the company's finances.
"State Farm General continues to collect insurance premiums paid by Californians and pay out claims to its existing customers," Sanchez said. "There is no law or regulation that prevents an insurance company from continuing to bill customers for premiums in a wildfire emergency. The commissioner's moratorium authority only applies to cancellations and non-renewals."