State Farm has become the first insurance company in California to win approval for emergency interim rate hikes, starting June 1. The decision comes after the insurer cited financial distress from more than $7 billion in projected claims related to the January wildfires in Los Angeles County. The state’s Department of Insurance recommended the approval, but Insurance Commissioner Ricardo Lara sought additional financial details and questioned whether State Farm’s parent company could offer assistance. Eventually, Lara conditionally approved the request, pending review by an administrative law judge.
Judge Calls Rate Hike a Rescue Mission Amid Strong Opposition from Fire Survivors
Administrative Law Judge Karl-Fredric Seligman oversaw a public hearing in April and later issued a 38-page decision supporting the emergency rate hike. He described the measure as a “rescue mission” essential for stabilizing State Farm’s finances while also safeguarding consumers. The approved increases include an average 17% hike for homeowners, 15% for renters and condo owners, and 38% for rental dwelling policies.
California Approves State Farm’s Emergency Rate Hike After Wildfires, Sparking Backlash From SurvivorsThe approval was met with strong resistance from wildfire survivors and lawmakers, who cited unresolved complaints about State Farm’s handling of claims. These critics urged Commissioner Lara to reject the request. However, Lara clarified during a Zoom meeting with fire victims that the rate hike and claims issues were being addressed separately. Despite the criticism, the rate hike moved forward.
Upcoming Full Hearing Will Test Justification for Controversial Emergency Rate Increases
Judge Seligman acknowledged that this precedent-setting decision could lead other insurers to seek similar emergency rate relief. However, he stressed that the upcoming full rate hearing next month would subject State Farm to a rigorous evaluation of its original rate proposals. Importantly, if the final approved rates are lower than the interim increases, State Farm has committed to refunding the difference to policyholders.
In post-hearing briefs, State Farm emphasized that the rate hike was vital to avoid further credit downgrades, which could threaten coverage for over a million homeowners in California. The Department of Insurance echoed that sentiment, arguing that the increases served the broader public interest by keeping insurance available. On the other hand, Consumer Watchdog, a public advocacy group, maintained that State Farm failed to justify the hikes on actuarial grounds and opposed the emergency approval.
