California homeowners are increasingly relying on State Farm insurance, with over 1 in 5 residents having the company as their provider. However, this growth comes at a cost to State Farm’s financial health.
According to climate and energy expert Michael Wara at Stanford University, State Farm is struggling financially due to its efforts to maintain and expand its California market share. This contrasts with other insurance companies that have reduced their presence in the state following devastating wildfires.
State Farm has been actively involved in assisting victims of the L.A. fires, processing nearly 8,700 claims and paying out over $1 billion to customers. However, experts warn that these costs will further erode the company’s capital reserves.
Rating agencies have already downgraded State Farm due to its financial struggles, and additional downgrades are possible if the situation worsens. This could impact customers’ ability to use State Farm insurance as collateral for their mortgages.
Amy Bach, executive director of United Policyholders, a San Francisco-based nonprofit, believes that State Farm’s efforts to provide data to the state Department of Insurance to substantiate its claim of having paid out its entire surplus will lead to some level of emergency increase approval.
Source: https://www.kqed.org/news/12025436/state-farm-seeks-emergency-rate-hike-california-after-la-fires