California Insurance Commissioner asks State Farm to justify 22% insurance rate increase
California's Insurance Commissioner scheduled a meeting with State Farm to justify its request to increase home coverage rates as high as 22%.
"Our decisions must be guided by transparent data and an honest reckoning with the challenges we all face together," Commissioner Ricardo Lara wrote in a letter to State Farm.
The company initially proposed its emergency insurance rate increase because of the "dire" financial situation caused by the destructive Los Angeles wildfires, including the Eaton and Palisades fires — the second and third-most destructive fires in California history which destroyed a combined 16,248 buildings and damaged thousands more.
"The costs of the January 2025 wildfires will further deplete capital from State Farm General. Capital is necessary so an insurance company can pay for any future claims for the risks it insures," State Farm General said in an open letter to the California Department of Insurance.
State Farm noted that the company received more than 8,700 claims totaling more than $1 billion by Feb. 1. To remedy this, it requested emergency rate increases of 22% for homeowners, 15% for renters, 15% for condominium tenants and 38% for rental dwellings, according to the Insurance Commissioner's office.
In his response letter, Lara noted that the insurance giant did not justify the emergency interim rate increase to satisfy the guidelines established by a 1988 law, Proposition 103.
"Under the strict review laid out by Proposition 103, the burden is on State Farm to show why this is needed now," Lara wrote. "State Farm has not met its burden."
To address the apparent shortcomings, Lara scheduled a meeting with State Farm representatives on Feb. 26 to go over its financial condition and the proposed rate increase. The Insurance Commissioner also said State Farm must show the impact on consumers and provide transparency.
