California’s Insurance Commissioner has not decided whether he will approve State Farm’s emergency interim request to increase insurance rates. Ian Cull reports.
As of Wednesday, California’s Insurance Commissioner has not decided whether he will approve State Farm’s emergency interim request to increase insurance rates. However, Commissioner Ricardo Lara said he hopes to have a decision within two weeks.
If approved, State Farm would increase rates in California 22% for homeowners, 15% for renters, 15% for condominiums, and 38% for rental dwelling coverage.
State Farm is the largest insurer in the state and ensures about 20% of the homes in California.
On Wednesday in Oakland, Lara called a private meeting with State Farm leaders and the nonprofit Consumer Watchdog. In attendance was Dan Krause, who is the chief executive for State Farm General Insurance Company, which is the California branch of State Farm. California law allows for third-party intervenors to participate in the rate approval process, and Consumer Watchdog is the intervenor for this case.
Back on February 3, State Farm began asking the state for an emergency interim rate approval to “help avert a dire situation.” While an emergency interim rate request is allowed under state law, the Department of Insurance says this move by State Farm is “unprecedented” because an interim rate request has never happened before.
After the hour-and-a-half-long meeting on Wednesday, Lara spoke with reporters. Lara said he does not plan to make a decision yet and will be meeting with counsel to go over what was said in the meeting and gather new information. Lara also suggested that updated data from State Farm may be available by the end of the week which could impact the decision.
“We understand that there’s an urgency, and we’re going to do our due diligence,” Lara told reporters. “What I am not going to do is be pressured by any outside group or any special interest group to make the decision.”
State Farm shared Tuesday that it estimates it will have to pay out $7.6B in claims associated with the LA fires. Lara said State Farm assured him on Wednesday that it would be able to pay out all the claims related to those fires. He said the question is whether the company will be able to pay out future claims this year.
Lara said he asked the executives at State Farm General (the company’s California branch) why its parent company (State Farm Mutual Automobile Insurance Company) hasn’t stepped in to provide support as it has done in other states.
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Lara said State Farm General responded by saying that getting this interim rate increase approved would signal commitment from the state and encourage the parent company to step in and help.
The commissioner also said that he is looking for a commitment from State Farm to stay and grow its business in the state.
“I didn’t get that today, but again, the three parties are gonna continue to have conversations,” Lara said.
William Pletcher, the litigation director for Consumer Watchdog, said that even after Wednesday’s meeting, he still does not believe State Farm has done what it needs to prove its financial difficulties.
“We’re concerned we’re not seeing the kind of financial information we need to see to fully evaluate their request," Pletcher said.
Pletcher said in the meeting Wednesday, that Lara indicated that he might ask State Farm to do a formal, public hearing of their rate request. Consumer Watchdog representatives said they would like to see that happen.
"The bottom line is that State Farm is entitled to a rate increase only if it can prove—with actuarial data subject to public review—that it is necessary,” said Pamela Pressley, senior staff attorney at consumer watchdog.
Both Consumer Watchdog representatives and Lara expressed concern Wednesday that if this emergency rate request was approved other insurance companies might attempt that same measure to get rate increases through.
State Farm General spokesperson Sevag Sarkissian said on Wednesday, “Today we took the opportunity to reiterate with Commissioner Lara the urgency needed to approve State Farm General’s interim rate request so that State Farm General can continue helping California customers.”
The Department of Insurance says a transcription of the meeting should be available by Thursday.
Martinez resident Nora King, who recently found out her State Farm home insurance policy is getting dropped, is questioning why the company should be allowed to raise rates.
“I’m not sure I would make a different decision if I was working for them, but it’s not a decision I feel works well for the insured. And I don’t think [State Farm] are the only ones, I think they’re the latest ones,” King said.
State Farm filed for a rate increase (which would include a 30% increase in rates for homeowners) back in June of 2024, but that request has not yet been approved. In May of 2023, State Farm stopped writing new policies in California, citing high losses and increased risks in the state.
