State Farm General is requesting a 39% rate increase for its California Personal Liability Umbrella Program, affecting over 430,000 policyholders. This program provides additional coverage for legal liabilities such as attorney’s fees from car accidents or damages from defamation lawsuits. If approved, the rate hike will take effect in August, marking the second major increase in six months. Previously, a 29% increase was approved, impacting customers upon their first renewal after March 1.
California Insurance Commissioner Ricardo Lara has emphasized the need for transparency in the rate increase process. According to CalMatters, State Farm must prove its need for these hikes at a public rate hearing scheduled for April 8. The company must present updated data to justify the increase.
State Farm has faced financial challenges due to increased wildfire risks in California, which have led to significant claims. The company stated that it has paid out $1.75 billion on claims from recent wildfires and expects over $7 billion in total claims. This financial strain has led to a potential downgrade in its credit rating, affecting its ability to meet mortgage lenders’ insurance requirements.
The rate increase request has sparked opposition from consumer advocacy groups like Consumer Watchdog, which has challenged the insurer’s rate requests. As reported by Desert Sun, these groups have welcomed the decision to hold a public hearing, where an administrative law judge will determine if the rate hike is justified. The outcome of the hearing could significantly impact the future of insurance rates in California.
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