State Farm is holding California homeowners hostage with unending rate raises | Opinion

My parents have been State Farm holders since 1985, first as renters, then homeowners, and they eventually put their life insurance and car insurance in the company’s hands, too. So when I bought my own home in 2022, there was never any doubt for me who I’d go with for insurance: State Farm.

I even use the same local agent, and last year, I switched my car insurance over to them as well because I decided I needed to finally upgrade from the cheapo insurance I’d bought in my 20s.

But if State Farm’s request to raise its rates is allowed by a judge next month, I will take my money, business and legacy to another insurer — even if I wind up paying more by losing my bundle — because I believe the strongest action a consumer can take is with their wallet.

State Farm General Insurance Co. leaders asked State Insurance Commissioner Ricardo Lara for an emergency rate increase last month. They are requesting an average of nearly 22% in price increase for homeowners policies across the state. The company claims it is in need of serious financial help following the wildfires in Southern California earlier this year.

On Friday, Lara announced he will approve State Farm’s request — but only if the company’s California arm can justify a need for it at a public hearing next month, according to Bee reporting.

In addition, to raise its rates, Lara stipulated that the California arm of the insurer, State Farm General, will have to stop non-renewing policyholders and instead seek $500 million from its parent company, State Farm Mutual, to cover losses. The company announced almost a year ago that it would not renew nearly 72,000 property and commercial apartment policies in California, sending the state’s homeowners into a panic over skyrocketing premiums.

“State Farm claims it is committed to its California customers and aims to restore financial stability,” Lara said in a statement. “I expect both State Farm and its parent company to meet their responsibilities and not shift the burden entirely onto their customers. The facts will be revealed in an open, transparent hearing.”

State Farm said in a statement to The Bee on Friday that it is “moving forward with implementing this provisionally approved rate and will continue to work with the California Department of Insurance for a sustainable future for the California insurance market.”

But I have little faith that State Farm will argue its case either openly or transparently.

Company blames wildfires, watchdog says differently

The company said it expects more than $7 billion in claims from the Southern California wildfires that killed 29 people and destroyed more than 16,250 homes, schools and other structures. But there is plenty of reason to doubt that State Farm is unable (or unwilling) to pay the claims.

“State Farm is demanding a backroom bailout from California homeowners while concealing critical financial details,” said William Pletcher in a February statement; Pletcher is the Litigation Director at Consumer Watchdog, the non-profit organization which advocates for taxpayer and consumer interests.

The organization has said that State Farm General paid $2.1 billion for reinsurance over the past decade, most of it to their parent company, State Farm Mutual. It also says State Farm General sent the parent arm of the company nearly $1 billion in utility repayments for the 2017-2018 California wildfires, instead of using those funds to offset wildfire losses.

“If the parent company returned that $1 billion in utility wildfire reimbursements to State Farm General it would double the company’s surplus overnight,” Pletcher said. With more than $144 billion in surplus, State Farm Mutual has not provided financial assistance to California, despite doing so for other states.

Enough is enough

In 2002, when I was in the 8th grade, a faulty installation caused a new air conditioning system in my childhood home to burst into flames in our attic in the wee hours of the morning. Luckily, the Sac Metro Fire Department arrived in time and the worst our home suffered was some water damage and the fraying of our family’s nerves.

The Epleys decided not to make a claim right away, because Mom knew they’d probably cancel our policy. Instead, she had her employer, a lawyer, send the company a letter threatening legal action if they didn’t cover repairs. (They did.)

But California needs more than a strongly-worded letter from a lawyer at this point. Insurance Commissioner Lara must insist that the company make good on the promises it made when it covered California homeowners.

State Farm is holding California hostage, and other insurers will follow suit if they’re not stopped.

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