State Farm deal: Home insurance increases stay, others cut

from Levi SumagaysaiCalMatters

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Fires in Los Angeles County last year drove up insurance costs for many Californians. Now, the proposed settlement means some State Farm policyholders whose premiums went up won’t see any further increases, and others may even get refunds.

State Farm, the state’s largest insurer with about 20 percent market share, received approval for unprecedented increase in emergency insurance rates in California last May. The company told the state the billions of dollars it expects to pay back after the deadly fires put it in financial jeopardy.

The proposed deal between the state insurance department, the consumer advocacy group Consumer Watchdog and State Farm, announced late last week, comes after months of public hearings called by the insurance department and settlement talks.

Consumer Watchdog, which has questioned the rate increases requested by State Farm, says the settlement saves the company’s policyholders in California a total of $530 million. From the proposed settlement:

• Homeowners’ rate hikes will remain at the previously approved interim rate of 17% instead of the 30% the company wanted.
• Flat owners who suffered interim rate hikes of 15% will see their rates drop to a 5.8% increase and will receive refunds with interest starting June 1, 2025.
• Rental homeowners with interim rate increases of 38% will see those increases drop to 32.8% and receive a refund with interest.
• Tenant policyholders will see a 15.65% increase over the interim rate increase of 15%.

In addition, State Farm has agreed not to cancel any new policies this year and will not cancel some policies it had planned not to renew in wildfire-affected areas. The insurance department characterized these provisions as important to the continued stability of the state’s insurance market, which has been plagued by availability and affordability issues.

“When consumer advocates are able to challenge data and present their own analysis, excessive claims are reduced and consumers are protected,” Harvey Rosenfield said in a statement. Rosenfield founded Consumer Watchdog and wrote Proposition 103, the voter-approved law governing insurance in California.

State Farm has so far paid out more than $5 billion in claims from the Los Angeles area fires, spokesman Tom Hartman said.

After consumer complaints and lawsuits, the insurance department is an investigation the company’s processing of claims from the fires and is awaiting the results of that review later this spring.

The settlement, which must be approved by an administrative law judge, also requires State Farm to undergo an additional review of its rates in 2027. The insurance department expects the judge to act by April 7. Then Insurance Commissioner Ricardo Lara will review the judge’s decision and have the final say.

This article was originally published on CalMatters and is republished under Creative Commons Attribution-NonCommercial-No Derivatives license.