State Farm rate increase subject to public hearing approval

On Friday, March 14 State Insurance Commission Ricardo Lara provisionally approved several emergency rate requests sought by State Farm Insurance. These interim increases must be justified and approved at a public hearing on April 8.

The pending provisional rate increases are 21.8 % for non-tenant homeowners, 15 % for tenants (renters), 15 % for tenants (condominium unit owners), and 38 % for rental dwellings.

“The role of Insurance Commissioner involves balancing a stable and sustainable insurance market that serves consumers with effective oversight. To ensure long-term choices for Californians, I had to make an unprecedented decision in the short term,” Lara said in the press release announcing his decision.

“State Farm claims it is committed to its California customers and aims to restore financial stability. I expect both State Farm and its parent company to meet their responsibilities and not shift the burden entirely onto their customers. . .

“To resolve this matter, I am ordering State Farm to respond to questions in an official hearing, promoting transparency and a path forward. It is evident that other California insurers are unable to absorb State Farm’s existing customers, which poses a significant risk of these customers ending up on the FAIR Plan—a scenario we all wish to avoid as my Sustainable Insurance Strategy is implemented,” Lara stated.

State Farm issued the following response to Lara’s decision, “It’s time for certainty in the California insurance market for our customers. The provisional nature of today’s decision does not improve that certainty but it’s a step in the right direction. We are 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 . . . In addition, State Farm General will continue to monitor capacity to support its risks and build sufficient capital for the future.”

And Carmen Balber, executive director of Consumer Watchdog, was pleased with Lara’s action. “It’s a victory for consumers that State Farm will now have to make its case in a public hearing before a judge and prove a rate hike is justified. The company has so far failed to back up its request, and unless State Farm proves otherwise the outcome of a hearing should be a rejection.”

Earlier in the week, Lara held a video conference with State Farm officials and the intervenor, Consumer Watchdog. During this meeting, he presented a proposal to the insurance company.

He expects State Farm will halt non-renewals throughout the State and pursue a $500 million capital infusion from its parent company to restore financial stability along with the interim rate increase.

“Currently, too many Californians live in fear of having their insurance policies non-renewed,” Lara emphasized in his announcement. “This anxiety perpetuates misinformation and discourages consumers from accessing their entitled benefits. This situation is unacceptable. I will remain vigilant in ensuring that State Farm processes claims fairly, fully, and promptly, and stands by its California customers.”