Following the devastating wildfires in Los Angeles, State Farm reports having received over 8,700 claims and over $1 billion in payouts to customers.
The company fears these large payouts could jeopardize future claims and the future of the company itself, so they’ve asked California’s insurance commissioner for an emergency rate increase.
In a letter, they are requesting an increase of 22% for investment properties. Renters and condo owners face a 15% increase, and rental properties face a 38% increase.
"It's really a shame that State Farm is using this tragedy to try and extract another massive rate increase from the pockets of Californians to line its bank accounts," said Carmen Balber, the executive director of Consumer Watchdog, a consumer protection organization.
She said State Farm has been profitable in California homeowner's insurance for the last 4 years.
"The parent company of State Farm has $134 million in the bank and State Farm has been sending profits out of the state in the form of reinsurance to its parent company," Balber said. "So if anyone needs to step in to shore up State Farm's finances, it's the parent company with billions of dollars in the bank, not California homeowners."
Balber said in 2023, State Farm got approval for a rate increase request that resulted in $470 million. In 2024, the company asked for another increase.
"Consumer Watchdog and the Department of Insurance asked State Farm to open its books and justify its finances in order to get that rate increase, and the company refused to provide that information. So that request has been outstanding since last July, when it made it, because State Farm wouldn't prove up the numbers," Balber said.
She said any insurance company can request an increase in rates at any time, but must justify the request.
State Farm declined to comment on their request for the rate hikes.
It will be up to the insurance commissioner's office to investigate and approve the request.
