California Insurance Commissioner Ricardo Lara has rejected State Farm’s request for an emergency 22% rate hike for homeowner policies, but agreed to meet with the company later in February to discuss their reasoning. The decision comes after State Farm reported receiving over 8,700 claims and paying out more than $1 billion following LA wildfires.
Lara cited Proposition 103, which requires insurers to prove that rate hikes are necessary and not excessive. He emphasized the need for transparency in the rate-making process and scheduled an in-person meeting with State Farm representatives, Consumer Watchdog, and other intervenors on February 26.
State Farm’s president/CEO Dan Krause had previously stated that the company would pay out significantly more due to the costliest fires in its history. The insurer requested immediate approval of interim rate increases effective May 1, but Lara said the company has not met its burden to explain why these hikes are needed now.
Consumer Watchdog expressed concern over State Farm’s motivations, suggesting the insurer sought a rate hike to protect its “Wall Street credit rating.” However, an analysis by S&P Global showed that State Farm and its parent company have $194 billion in surplus and reserves combined. Lara emphasized the need for transparent data-driven decisions, stating that consumers struggling after wildfires should not be forced to pay higher premiums to prop up the insurer’s bank accounts.
Source: https://www.10news.com/news/local-news/state-farms-emergency-rate-hike-rejected-by-insurance-commissioner