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State Farm Requests Emergency Interim Fire Insurance Rate Increase

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Sacramento, CA — Insurance giant State Farm is requesting that the California Insurance Commissioner allow an emergency interim rate hike in response to the recent destructive wildfires in Los Angeles.

If approved, it would impact the estimated three million State Farm fire insurance policyholders in California. It requests a 22% rate increase for homeowners, 15% for condo owners, and 38% for rental dwellings. It would remain in place over the short term, starting May 1, while the state reviews permanent rate increases.

The letter to Insurance Commissioner Ricardo Lara, states, “As of February 1st, State Farm General Insurance Company (SFG) has received more than 8,700 claims and has already paid over $1 billion to customers. We know we will ultimately pay out significantly more, as these fires will collectively be the costliest in the history of the company. Although reinsurance will assist us in paying what we owe to customers, the costs of these fires will further deplete capital from SFG. Last year, one rating agency downgraded SFG and, with further capital deterioration as a result of the fires, additional downgrades could follow. If that were to happen, customers with a mortgage might not be able to use State Farm General insurance as collateral backing for their mortgage.”

Insurance Commissioner Lara has not yet responded to the request.

The non-profit Consumer Watchdog group is opposing the proposed increase and argues that State Farm first needs to provide more information to prove that it needs the money and argues that the parent company had previous years of strong profit.

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