2 weeks Ago By LA Times
State Farm General, California's largest home insurer, asked state officials for an emergency rate hike averaging 22% Monday, saying the Los Angeles County fires have put the company in dire financial straits. The insurer, a subsidiary of State Farm Mutual Automobile Insurance Co. of Bloomington, Ill.
, said the company has already received at least 8,700 claims and paid more than $1 billion to customers. It expects to pay out "significantly more," with the fires being the costliest natural disasters in its history. "As the insurance commissioner, you can have a very significant impact on [State Farm General's] ability to continue operating in California by immediately approving the requested interim rate changes," the company said in a letter to state Insurance Commissioner Ricardo Lara.
The company is also asking for rate hikes of 38% for rental dwellings and 15% for tenants, with the rates taking effect May 1. State Farm said the latest request is necessary to rebuild the company's capital base so it will not have to "further constrain" the company's ability to provide home insurance in the state. Insurance industry ratings agencies have said they expected premium increases due to the fires.
Read more: First, they lost their home insurance. Then, L.A.
fires consumed their homes The California insurer said it has lost $2.8 billion over the nine-year period ending last year, including gains from investment income. It also noted State Farm General's financial rating was downgraded last year by AM Best.
The company said it will access reinsurance it acquired from its parent to pay claims from the Los Angeles-area fires. State Farm General, which had about a 20% share of the homeowners insurance market in 2023, insures about 1 million homeowners in the state and has 1.8 million other policies in force.
The proposed rate hike is likely to be controversial. In June, the company filed for a 30% rate increase for its homeowners polices, a 36% increase for condo owners and a 52% increase for renters. That request took state officials by surprise, with Lara saying it raised "serious questions about its financial condition.
” That rate hike request is still pending. State Farm said it is prepared to issue refunds for customers who pay the interim emergency rates if the department approves lower increases for the rate hikes it sought last year. The company previously received a 6.
9% bump of its homeowner rates in January 2023 and a 20% hike that went into effect in March of last year..
