State Farm, California’s largest property insurer, won a first-of-its-kind emergency approval on Tuesday to quickly hike rates on more than a million homeowners and renters insurance policies.
State Farm said it needs the emergency rate hike, by more than 15%, because the Los Angeles-area fires depleted the company's cash reserves. The historic approval came in two decisions on Tuesday.
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WATCH HEREFirst, a morning decision from an administrative judge. He had heard testimony in the case this past month in Oakland. Ultimately, that judge concluded State Farm’s proposed rate hike was “fundamentally fair, adequate, and reasonable.”
The ruling then put the decision in Insurance Commissioner Ricardo Lara hands. Within a few hours, Lara signed off on the rate hike. He agreed with the judge and said, in part, “I am balancing all the facts. protecting all state farm customers and the integrity of our insurance market is an urgent matter.”
Lara’s spokesman said the commissioner was not available for an interview Tuesday.
On its website, State Farm responded and said, in part, “We thank the commissioner for this approval and look forward to continuing to work with the commissioner and others on a more sustainable insurance market in California.”
Here’s the breakdown of the average rate hike:
- 17% for homeowners
- 15% for renters
- 38% for rented dwellings (aka landlords)
The new rates are expected to commence in June.
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SIGN UP The lingering question here is whether other companies’ home insurance rates will rise like this. NBC Bay Area asked Amy Bach with the San Francisco non-profit United Policyholders, which tracks insurance issues and helps customers.
“State Farm is a trendsetter,” Bach said. “But every one of these insurers has to prove their case. If they come in for a rate increase, they’ve got to show they need it. State Farm showed they needed it. If other insurers feel they need it, I’m sure they’ll be coming in [for increases].”
State Farm will go one more round with the state, at a full (and final) non-emergency rate hearing that is scheduled for later this year. But no insurance experts we’ve talked to expect the state to do an about face on State Farm’s rate hike. If the state does do a 180 degree turn, policyholders would get refunds. But again, that appears unlikely.
