Everyone else about to start subsidizing mansion payouts | Thomas Elias

Here's the likely outcome of the April 8 hearing set to follow the California insurance commissioner's tentative mid-March approval of a 22 percent average rate increase for customers of State Farm General Insurance Co., this state's largest carrier of home insurance policies:

All other Californians will soon be subsidizing the rebuilding of myriad mansions burned down in the January firestorm that ravaged much of Los Angeles County. Plus a good number of less luxurious homes, too.

Commissioner Ricardo Lara tentatively approved the average 22 percent rate hike for State Farm customers, with similar increases sure to come also for customers of other insurance companies like Mercury, Safeco, Travelers, Allstate and more.

These increases will hit virtually everyone: They include a 38 percent hike for rental properties, with a 15 percent raise for renters' insurance on contents and for condominium owners.

The hearing will see opposition from several consumer groups, most prominently the Consumer Watchdog advocacy group. The eventual outcome may end with some increases dropping a percentage point or two. As it stands, what Lara tentatively approved amounts to an average of about $600 per year for every policyholder in the state.

Make no mistake, this is a pure subsidy for State Farm and the folks it insures. Perhaps the archetype claim from the January fires was for a destroyed home on two contiguous ocean-front lots in Malibu that sold three years ago for $85 million.

Trying to put up a show of looking after customers' interests, Lara said he will expect State Farm to stop canceling homeowner policies, a practice that led to intense distress for some victims of the latest crop of large wildfires because many were forced after cancellations to turn to the state's expensive and not very comprehensive last-resort insurer, the California Fair Plan.

Lara also said he will expect State Farm General's parent company, Illinois-based State Farm Mutual, to contribute hundreds of millions, perhaps as much as $500 million, from reserves long held by the parent company. That would be a tiny fraction of the company's actual reserves, which in January stood at a minimum of $134 billion, with some estimates as high as $192 billion.

So people who live in areas that have never seen a wildfire and are not likely ever to experience one will soon contribute to payouts for owners of large homes in Malibu and Pacific Palisades.

What's more, State Farm and other insurance companies stand to get much of their money back via the current spate of lawsuits blaming Southern California Edison Co. transmission lines for sparking the Eaton fire that incinerated much of Altadena, about 40 miles east of Pacific Palisades. Once insurance companies pay their policyholders off in that area, they will inherit any customer claims against the big utility.

Then there's re-insurance, routinely bought by insurance companies to insure themselves against big losses. That will cover more billions of dollars for them.

None of that will much mitigate what Lara likely will allow the insurance companies to add to customer premiums starting in May. These other factors making life easier for the insurance industry have played little or no role in price increases assessed after previous wildfires hit other parts of California through the last eight years.

Meanwhile, the closest customers have heard to the truth about all this came from a since-fired State Farm executive who was secretly recorded saying his company uses policy cancellations as a ploy to drive prices up in California and other disaster-prone states.

Haden Kirkpatrick, until recently State Farm's vice president for innovation and venture capital, was fired immediately after he became the first completely truthful insurance executive this nation had seen in decades.

But Lara showed no sign of paying the slightest heed to anything Kirkpatrick admitted. Which should come as no surprise from a state official who promised never to accept campaign donations from the companies he regulates and then took large sums, only to be shamed into returning the money later.

The entire exercise is shameful and demonstrates why, when Lara leaves office after next year, his replacement must be far more consumer friendly.