Wednesday was the second day for critical hearing that will decide whether State Farm, California’s largest home insurer, can raise rates by double digits. Ian Cull reports.
Wednesday was the second day of a critical hearing that will decide whether State Farm, California’s largest home insurer, can raise rates by double digits.
A judge heard arguments for a second day over state farm’s proposed rate hike. State Farm General’s attorneys said they need to increase rates, which is 17% on homeowners, 15% on renters and 38% for rental property owners’ coverage.
In order to rebuild capital following all the claims, it is paying out from the SoCal wildfires. The hike is something many current policy holders say would be difficult to stomach.
“Nobody likes to pay more but i understand why the insurance companies are raising it…what i can do is maybe take a bigger deductible to cut the price back. I could do that,” said Morgan Hill resident Raj Raman.
This hearing is critical with the state saying the insurer has to prove it's necessary. To try and convince the court, attorneys for State Farm General announced the company was lowering its rate hike request from 22% to 17%, telling the court, if its approved, their parent company would put in $400 million to offset costs.
They added that If the hike were deemed excessive in the future, they'd repay policyholders with interest.
David Appel, an economist who consults for the insurer, testified Wednesday morning.
“I believe it’s absolutely necessary, both to immediately assist State Farm General in its current financial condition and also to send a signal to the market that State Farm General is here to stay,” he said.
But consumer watchdog argues State Farm General’s parent company, should be chipping in more and rate payers shouldn’t be on the hook for a bailout.
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The claim the rate jump would cost the average homeowner $468 more per year. Some people who’ve had their insurance dropped recently told NBC Bay Area that they're seeing a change in how insurers are doing business.
“Then, all the sudden about four or five years ago, they’re all over you. They want every little thing moved, fixed, whatever. It’s really frustrating,” said Morgan Hill resident Clorinda Sergi.
This hearing is expected to last one more day and after that, the judge will make a recommendation to the state’s insurance commissioner, who will ultimately decide whether to green light the rate hike.
If approved, the new rates would begin on Jun. 1.
