A state farm logo is seen on February 03, 2025 in front of a state farm insurance office in Larkspur, California.
Justin Sullivan | Getty Image News | Getty images
The State Farm is making its own case for a major rate hike for owners of California home this week, which can prove to be important for the future of the insurer.
The state’s largest property insurer requires approval to increase its rates on customers, and is applied to an increase in emergency rates. The company argues that it requires additional funds to promote capital and avoid a rapidly serious financial condition after Los Angeles’ wildfire.
The State Farm General, which is the California Arm of the National original company, is presenting his case for an administrative judge in Oklaland after providing provisional approval for his emergency request by State Insurance Commissioner, Ricardo Lara for his emergency request.
The three -day hearing is going to be wrapped on Thursday.
The state form status is uncertain. A lawyer for California’s Insurance Department compared it to the Titanic, saying that the iceberg is in vision, but still has time to turn around the cosmic ship.
“If we don’t, the people of 3 million California are going into the water and are not enough lifeboats,” that lawyer, Nikki McKayedi warned.
According to Accuweather, the historic wildfire, which broke through Los Angeles in January through Los Angeles, estimated $ 250 billion to $ 275 billion and comprehensive economic recession, it became the most expensive natural disaster on the record.
The State Farm General has about 20% of the market owners of California with about 3 million policies. The insurer has so far paid more than $ 2.75 billion at about 12,390 claims filed as a result of LA wildfire and estimated that the direct loss of fire is around $ 7.6 billion, although the re -re -loss loss will be around $ 612 million.
In February, the insurer requested that the insurance regulators approve the rate hike on the owners of the 22%home. It has since reduced its request to increase by 17%. The state farm is filing a petition for a 38% increase on tenant housing policies, which is coverage for landlords, and 15% for tenants.
State Farm General’s Attorney said on Tuesday that if the rate is increased, it has also agreed to look for a $ 400 million fund from its original company.
In February, S&P cited the state farm’s California a subsidiary and its AA Credit Rating on “Creditwatch Negative”, referring to 5 -year weak and capital scenarios.
Prior to the disastrous LA wildfire, insurers were facing major damage in the state due to the frequency and size of natural disasters in the last decade. Insurance Commissioner Lara, who has not been elected, hated to approve the significant rate hike for both home owners and auto insurance.
According to the Insurance Information Institute, meanwhile the carriers pay more in claims and expenses in the state. As a result, many insurers have limited the new business or cut their policies in the state.
The State Farm decided to stop writing new home owners insurance policies in California in May 2023. The following year, it was announced that it would not renew 72,000 policies, including 30,000 property insurance policies and 42,000 commercial apartment policies for homeowners, which refer to financial instability and increasing risk.
During the administrative hearing this week, economist David Apel called California Market unstable and said it was dramatically bad. He said that the insurer of the state’s last resort, a fair plan, which many house owners had run away after being demolished by their insurers, have increased astronally with insufficient capacity.
The state has prepared a “permanent insurance strategy” that makes the insurers a framework to allow the insurers to use the cost of the destruction modeling and rebuilding when their rates are designed. It is also for streamlining the process by which those rates are approved.
Janet Ruiz of Insurance Information Institute said that the implementation of that scheme this year is important to fix the systemic issues that caused the insurance crisis in the first place and is an essential step towards creating a more stable market in California.
Apel testified that he believes that 17% emergency growth is making state farm request, resulting in financial stability for the insurer.
The California Department of the Department of Insurance supports the request to increase the rate of State Farm, but the advocacy group is advocating against the consumer watchdog rate increase.
“The company has not made a required case under the law,” the chief lawyer of the Consumer Watchdog said in a press release. Their proposal is also not consistent. Earlier they wanted 22%. Now they want 17%. “
“We are glad that the amount has decreased, but it should still be justified, and the state farm,” he said.
