State Farm has become the first insurance company in California to receive approval for an emergency interim rate hike. Starting June 1, the company will raise homeowner rates by 17%, condo and renters insurance by 15%, and landlord rental-dwelling insurance by 38%. This decision follows the Los Angeles County fires in January, which led to over $7 billion in expected claims, putting State Farm in financial distress.
The California Insurance Department initially recommended approval of the rate hike, but Insurance Commissioner Ricardo Lara asked for more information before conditionally approving it. An administrative law judge, Karl-Fredric Seligman, then held a three-day public hearing and recommended the rate increase, stating it was necessary to stabilize State Farm’s financial condition while safeguarding policyholders. Commissioner Lara adopted the ruling, emphasizing the importance of protecting State Farm customers and the integrity of the insurance market.
Despite the approval, the decision has faced opposition. Consumer Watchdog, an advocacy group, argued that the rate hike should not occur before justification, as required by Proposition 103. Additionally, some fire survivors and lawmakers have criticized State Farm’s handling of claims, urging further investigation into the company’s practices.
State Farm has agreed to obtain a $400 million surplus note from its parent company, State Farm Mutual, and promised to halt non-renewals of policies through the end of the year. A full rate hearing is scheduled for later this year, where State Farm must justify the need for the rate increases. If the approved rates are found to be unwarranted, policyholders may receive refunds.
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