State Farm is requesting an emergency rate hike in California that could increase premiums by up to 38%. The California Department of Insurance held a public hearing on Tuesday (April 8) to evaluate the request. State Farm, the largest insurer in the state with about 1 million home insurance policies, argues the increase is necessary to recover from financial losses due to the Los Angeles wildfires, which destroyed over 16,000 buildings. The company claims the hike will help rebuild its capital and prevent a potential financial crisis that could force it to drop policies in California.
The proposed rate hike includes a 22% increase for homeowners, a 15% increase for renters and condos, and a 38% increase for rental dwellings. State Farm’s attorney, Kathrine Wellington, stated that the interim rate is “fundamentally fair, adequate, and reasonable” in response to the wildfires, as reported by FOX LA. The company has already raised rates twice in the past year.
Consumer Watchdog, an advocacy group, opposes the rate hike, arguing that State Farm has not provided sufficient data to justify the increase. They claim the company paid its parent company $3 billion in reinsurance, which they allege is a way to balance corporate finances. The group insists that State Farm has not met legal requirements to prove the necessity of the rate hike.
Insurance Commissioner Ricardo Lara will have the final say on the rate hike, following a proposed decision by an administrative law judge. If approved, the new rates could take effect on June 1, affecting nearly 3 million State Farm customers in California. The hearing is expected to last several days, and the outcome could have significant implications for insurance availability in the state, according to CalMatters.
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