California’s Lara Says No to State Farm — State Farm is Disappointed

California Insurance Commissioner Ricardo Lara has said no to State Farm’s request for an emergency rate increase. Lara told the insurance company that it did not meet the burden of proof the increase is needed.

State Farm wanted an immediate hike of 22% for homeowners, 38% for rental homes and 15% for renters and condo owners. With the denial, the company’s stance on the decision is an expected conclusion.

“We are very disappointed the Commissioner ignored his department’s recommendation to take the critical and necessary step to approve State Farm General’s request for interim rate increases associated with our June 2024 filings,” the company noted in a news release. “This lack of approval sends a strong message to State Farm General about the support it will receive to collect sufficient premiums in the future to protect Californians against the risk of loss to their homes, property, and other claims.”

State Farm wanted the increase because of damage costs it has incurred from the Los Angeles area wildfires.

Before denying the request, Lara asked State Farm to answer a number of questions:

• What, if anything, has changed for State Farm between June 2024 and now that necessitates emergency relief?
• In the absence of non-wildfire catastrophic losses in 2022 and 2023, how does State Farm explain the significant decrease in its policyholder surplus?
• What has State Farm done to prevent its surplus from further deterioration between May 2023 to present besides shed policyholders through ceased writings and nonrenewals?
• Has State Farm provided adequate documentation to the Department to support the current rate increase request for each line of business?
• Other than rate increases, what other plans does State Farm have to address its financial challenges? For example, would State Farm’s parent company, State Farm
• Mutual Automobile Insurance Company, be willing or able to provide financial support to State Farm as it has in other similar situations?
• What is State Farm doing to manage and restore its financial position given its statement that rate increases alone will not be sufficient?
• How would granting an emergency rate impact State Farm’s business decisions to pause writing of new residential coverage and non-renew policies?

State Farm said it answered the commissioner’s questions fully.

“We have gone to great lengths to clearly answer the questions outlined by the Commissioner,” State Farm said. “While we’re positioned to handle all of the claims associated with the most recent wildfires, State Farm General must seriously consider its options within the California insurance market going forward.”

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