State Farm General is seeking to dramatically increase residential insurance rates for millions of Californians, a move that would deepen the state’s ongoing crisis over housing coverage.
In two filings with the state’s Department of Insurance on Thursday signaling financial trouble for the insurance giant, State Farm disclosed it is seeking a 30% rate increase for homeowners; a 36% increase for condo owners; and a 52% increase for renters.
“State Farm General’s latest rate filings raise serious questions about its financial condition,” Ricardo Lara, California’s insurance commissioner, said in a statement. “This has the potential to affect millions of California consumers and the integrity of our residential property insurance market.”
State Farm did not return requests for comment.
Lara noted that nothing immediately changes for policyholders as a result of the filings. His said his department would use all of its “investigatory tools to get to the bottom of State Farm’s financial situation,” including a rate hearing if necessary, before making a decision on whether to approve the requests.
That process could take months: The department is averaging 180 days for its reviews, and complex cases can take even longer, according to a department spokesperson.
The department has already approved recent State Farm requests for significant home insurance rate increases, including a 6.9% bump in January 2023 and a 20% hike that went into effect in March.
State Farm’s bid to sharply increase home insurance rates seeks to utilize a little-known and rarely used exception to the state’s usual insurance rate-making formula. Typically, such a move signals that an insurance provider is facing serious financial issues.
In one of the filings, State Farm General said the purpose of its request was to restore its financial condition. “If the variance is denied,” the insurer wrote, “further deterioration of surplus is anticipated.”
California is facing an insurance crisis as climate change and extreme weather contribute to catastrophic fires that have destroyed thousands of homes in recent years.
In March, State Farm announced that it wouldn’t renew 72,000 property owner policies statewide, joining Farmers, Allstate and other companies in either not writing or limiting new policies, or tightening underwriting standards.
The companies blamed wildfires, inflation that raised reconstruction costs, higher prices for reinsurance they buy to boost their balance sheets and protect themselves from catastrophes, as well as outdated state regulations — claims disputed by some consumer advocates.
As insurers have pulled back from the homeowners market, lawmakers in Sacramento are scrambling to make coverage available and affordable for residents living in high-risk areas.
Times staff writer Laurence Darmiento contributed to this report.
