State Farm asks California to approve rate hikes after wildfires
2025-02-04
Category: economic

California homeowners, already devastated by last month&#x2019;s wildfires, could see their insurance rates go up by more than 20% if they&#x2019;re covered by State Farm. California&#x2019;s largest private insurer, State Farm, is seeking a 22% average rate increase for homeowners. In a letter urging the California Department of Insurance (CDI) to &quot;immediately approve&quot; the request, State Farm said the hikes would help &quot;avert a dire situation.&quot;  CALIFORNIA INSURANCE CRISIS: LIST OF CARRIERS THAT HAVE FLED OR REDUCED COVERAGE IN THE STATE The insurer is looking to increase rates by 22% for non-tenant homeowners, 15% for renters and condo owners, and 38% for rental dwellings. In its open letter to the CDI, State Farm says the increased rates would go into effect on May 1, 2025. &quot;As of February 1st, State Farm General (Fire only) has received more than 8,700 claims and has already paid more than $1 billion to customers,&quot; the insurer wrote in a press release on its website. &quot;State Farm General will ultimately pay out significantly more, as collectively these fires will be the costliest disasters in the history of State Farm General.&quot;  WILL HURRICANES AND WILDFIRES CAUSE INSURANCE PRICES TO RISE NATIONWIDE? The insurer added that it must increase current rates to ensure it could pay possible future claims. Additionally, State Farm announced that rates for Californians would be going up because the &quot;risk is greater&quot; in the Golden State. &quot;We look forward to working alongside regulators, policymakers and industry leaders on creating a sustainable insurance environment in California &#x2013; one that balances risk and increased rates, ensures long-term market stability and keeps insurers like State Farm General a vital part of California&#x2019;s future,&quot; the company said. State Farm faced backlash at the height of the wildfires over a March 2024 announcement that it would discontinue coverage of 72,000 home and apartment policies in the summer. In March 2024, the insurer issued a letter to the CDI, saying the depletion of State Farm&#x2019;s capital was &quot;alarm signaling the grave need for rapid and transformational action.&quot;  STATE FARM, OTHER INSURERS SLAMMED FOR DROPPING COVERAGE While insurers can and do receive approvals for larger increases &#x2014; State Farm secured a 20% increase in home and auto premiums in January 2024 and subsequently requested a 30% increase for home policies last summer &#x2014; the process can be time-consuming and the size of rate hikes approved by the regulator may not be sufficient for insurers to continue offering policies while preserving their financial stability. The January 2025 wildfires only highlighted California&#x2019;s ongoing insurance crisis as several providers had already fled the state, stopped writing new policies or otherwise reduced their risk exposure in the Golden State. This includes Allstate, Nationwide, and Farmers. GET FOX BUSINESS ON THE GO BY CLICKING HERE As of Tuesday, according to Cal Fire, the wildfires burned more than 57,600 acres and destroyed over 16,200 structures.