California Insurance Commissioner Ricardo Lara has rejected State Farm’s request for an “emergency” premium increase of 22% on average for California homeowners, pending more information. The move sets up a potentially contentious showdown between the commissioner and the state’s largest insurer.
Lara denied the request in a letter to State Farm executives, citing his need for more information before making a decision. He also asked the company to appear before him in person on February 26 at the Insurance Department’s office in Oakland to answer questions about the request.
State Farm had requested the interim rate increases due to its significant losses from recent wildfires in Los Angeles County, including $1 billion in claims paid out so far. The company claimed it needed to raise premiums starting in May to cover its expected costs.
However, Lara’s department recommended approving the rate increases, citing a proposed agreement that would have included refunds if rates were eventually lowered. Consumer Watchdog, which intervened last year when State Farm filed its rate requests, urged Lara to reject the request due to what it called “misleading” policyholder communications.
The commissioner acknowledged his staff’s recommendation but stated his primary responsibility is to the people of California. He also asked for explanations on changes between the company’s previous request and the current one, as well as information on how granting the rate increase would affect State Farm’s decision not to write new policies in California.
State Farm General has nearly 3 million policies in the state, including 1 million homeowner policies, and its CEO has expressed concerns about the impact of the requested rate increases on customers and the broader market. A public hearing is necessary only when parties do not reach a settlement, according to insurance department spokesperson Michael Soller.
The decision sets a high-stakes test for Lara and State Farm as they navigate the complex issue of insurance affordability in California, which has struggled with availability and affordability issues in recent years.
Source: https://calmatters.org/economy/2025/02/regulator-stops-california-home-insurance-price-hike