State Farm & California Commissioner — Who Blinks First?

State Farm wants an emergency rate hike that averages 22%. California Insurance Commissioner Ricardo Lara said no. He did, however, say yes to a request by Mercury General for a 12% starting this month, and to Safeco’s request for a 7.2% hike.

Upset, State Farm pushed for, and received, a face-to-face meeting with Lara.

Mark Schwamberger — the CFO of State Farm General — told Lara and other leaders in the California Department of Insurance that his company’s financial stability has been weakened by the $7.6 billion in claims from the Los Angeles area wildfires. So far, State Farm has paid Los Angeles area victims $1.76 billion.

“The ability, prospectively, to continue to stay behind our policies as we enter fire season, it’s in jeopardy, sir,” Schwarmberger told Lara. “And it’s a very serious situation."

Without that emergency increase approval, Schwarmberger said State Farm will have to  limit its exposure to wildfire losses and initiate "significant non-renewals.”

Last year State Farm dropped 72,000 policies in California and quit writing homeowners policies in the state. And Schwarmberger said even if the increase is granted, State Farm might not go back to writing homeowners policies in California.

The threat has exasperated Lara. ”I want to see some guarantee that they’re going to come, that they’re going to commit to engage,” Lara said. “I didn’t get that."

The game of chicken between Lara and State Farm has homeowners in California on edge. If the company cancels more policies, homeowners in high risk areas are going to be in a world of hurt when it comes to finding insurance.

Most will be pushed to the state’s insurer of last resort, the FAIR Plan. It’s already stressed from the numbers who’ve been forced there in the last few years.

Lara said he’ll get back to State Farm and Schwarmberger, and give them an answer, in a couple of weeks.

Source link: Insurance Business America — https://bit.ly/41maqyN