State Farm must wait on emergency home insurance rate increase bid after California wildfires

Stephen Hobbs, The Sacramento BeeSacramento Bee

Insurance Commissioner Ricardo Lara said State Farm must answer more questions about its finances before the company can be approved for an emergency rate increase in response to the devastating fires in the Los Angeles area.

In a letter Friday, Lara requested a meeting with company officials and representatives from a group challenging the request later this month.

Executives for State Farm General Insurance Company, the firm’s California arm, asked Lara for a 22% price increase on Feb. 3. They told the commissioner their business “needs your urgent assistance in the form of emergency interim approval of additional rate to help avert a dire situation for our customers and the insurance market in the state.”

State Farm, which has long been California’s largest home insurer, received more than 8,700 claims related to the Los Angeles area fires as of Feb. 1 and had paid out over $1 billion, according to the letter. The company says it covers roughly 250,000 homes in Los Angeles County and over 1 million in the state.

The wildfires, which began January 7, are blamed for at least 29 deaths and displacing thousands of homeowners.

Even before the fires, the company had said it was facing financial challenges in California. In recent years, it and other insurers have stopped or restricted new business and not renewed policies.

Companies need Department of Insurance approval to increase rates for home and auto coverage — a process that can sometimes take more than a year. They have called for quicker action, saying the price hikes are needed, in part, because of growing risks of major fires.

State Farm in June asked the department to allow the company to raise its rates for homeowner policies by an average of 30% across California. That request is pending.

Consumer Watchdog, an advocacy organization, has challenged that request. Attorneys for the group also urged Lara and department staff to reject the recent emergency proposal, saying in recent letters that the company needed to provide more information to show why it should receive the immediate help.

Lara told State Farm that Consumer Watchdog would also be present at the meeting.

“My goal is to make sure policyholders do not have to pay more than is required,” he said in the letter.

State Farm executives, when asking for the quick increase, said the company in 2016 had roughly four times more money available to pay claims in California than it did at the end of 2024.

During that time, policyholders and attorneys have also accused the company of improperly denying coverage for water damage as part of a larger effort to cut costs while boosting profits.