State Farm Granted Huge Rate Hike in California

California Administrative Law Judge Karl Seligman has ruled that State Farm needs a rate hike to continue to do business in the state. The judge held the three day hearing in early April and found “the evidence presented in the hearing established a prima facie showing that State Farm is experiencing extraordinary financial distress, coupled with surplus depletion that threatens ongoing business operations.”

In addition to granting the temporary rate hike, the ruling will require State Farm’s parent company to immediately put $400 million to help alleviate the insurer’s money problems. “While the interim rates remain temporary and subject to further review, the stipulation seeks to balance consumer protections with the need for financial stability,” the judge wrote.

The judge didn’t grant that increase but instead awarded State Farm a 17% interim rate increase for the homeowners line. That’s down from the 21.8% the company requested. The commissioner also said the judge granted an interim 15% hike for renters and condo insurance policies and 38% for landlord coverage.

Lara said his original decision to hold the hearing, and to balance the facts, and the judge’s temporary ruling are to protect State Farm’s customers and the integrity of California’s insurance market.

“Let me be clear: We are in a statewide insurance crisis, affecting millions of Californians,” Lara said in his statement. “Taking this on requires tough decisions. This is not a game. This is not a media-driven moment for some to exploit — this impacts people I am committed to protecting.”

With the increase, the commissioner expects State Farm to step up.

“I expect State Farm provide the highest level of service to its California customers and to fulfill its promises. State Farm must now justify its financial condition and detail its recovery plan in a full rate hearing before a neutral judge and my Department’s experts,” Lara said in conclusion. “I am focused on ensuring that State Farm pays its claims to wildfire survivors fully and fairly – and nothing is off the table.”

The rate increase goes into effect on June 1st.

Source link: California Department of Insurance — https://bit.ly/3GY24qD