The state insurance commissioner has already signaled his willingness to approve the increase.
The state insurance commissioner has already signaled his willingness to approve the increase.
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This week, State Farm will seek to convince state insurance regulators to finalize a steep emergency rate hike for homeowners across California in the wake of the devasting Los Angeles wildfires.
Insurance Commissioner Ricardo Lara has already signaled his willingness to allow the company to raise homeowner rates by an average of 22%. He also granted the state’s largest insurer initial approval to increase premiums by 15% for renters and condo owners and 33% for rental owners.
But before giving his final sign-off, Lara ordered State Farm representatives to appear before an administrative judge to justify the company’s request — a rare move for a rate hike proposal. That multi-day public hearing starts Tuesday in Oakland and could last through Thursday. It will be live-streamed on YouTube.
After the hearing, which will also include testimony from consumer advocates who oppose the hikes, the judge will issue a proposed decision within 10 days. It will then be up to Lara to decide whether to accept it.
If approved, it’s unclear how much premiums could go up in the Bay Area or which parts of the region would see the largest rate hikes, which could take effect as early as June 1 for many homeowners. Statewide, the insurer covers roughly 15% of homes, totaling more than 1 million customers.
The insurer’s California-only subsidiary, State Farm General, says the emergency hikes must be approved quickly to ensure it can pay out future claims after it expects to cover $7.6 billion in estimated losses from the wildfires in Los Angeles County. State Farm General said it has the money to cover the staggering damage but must raise rates to shore up its shaky financial health.
Even before the multibillion-dollar blazes earlier this year, State Farm General had issued multiple warnings about its solvency. The provider said once it pays out claims from the Los Angeles fires, it expects its cash surplus to drop from $1.04 billion at the end of 2024 to $600 million. S&P Global Ratings recently threatened to downgrade the insurer’s credit rating, signaling concerns about its financial strength.
Ahead of the hearing, Lara called on State Farm General to stop canceling coverage for homeowners in fire-risk areas and to ask its parent company for $500 million to stabilize its financial situation. However, the commissioner could still approve the rate hikes even if the insurer doesn’t commit to those steps.