California’s home insurance crisis continues as the state’s biggest home insurer says it needs to increase rates by as much as 52%.
In December, the California Insurance Commissioner approved a 20% increase for State Farm’s homeowners’ and condominium owners’ policies, according to CNN.
But the insurer filed a request Thursday saying it needs rate increases of 30% for homes, 52% for renters, and 36% for condo owners.
The company said in a statement it is working toward long-term sustainability in California.
“Rate changes are driven by increased costs and risk and are necessary for State Farm General to deliver on the promises the Company makes every day to its customers,” the company said in its statement.
Third Major Change in a Year for State Farm
At 9.1%, State Farm Group had the biggest market share in California in 2023 for property and casualty insurance, according to the California insurance commissioner’s report.
In March, the company announced it would not renew approximately 30,000 insurance policies for homes, rentals, and businesses.
It also said it would withdraw from offering 42,000 policies for commercial apartments.
Those policies make up just over 2% of State Farm’s policies. Wednesday marked the beginning of the company’s strategy to terminate policies.
Insurance Commissioner Questions State Farm’s Financial Conditions
In the era of California wildfires, insurers have said the state’s Proposition 103 has kept them from being profitable enough to maintain business in the state. The 1988 voter initiative requires insurers to get approval for rate increases before they can be implemented.
Natural disasters exacerbated the cost of doing business with increased payouts in fire-prone areas. Of State Farm’s $30.5 billion in premiums it collected in 2023, losses totaled $28 billion, according to the company’s 2023 financial statements released in February. The company’s $7.1 billion in underwriting expenses resulted in a net loss for the company nationwide.
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The California Insurance Commissioner said State Farm’s rate filing request raised “serious questions about its financial conditions.”
“This has the potential to affect millions of California consumers and the integrity of our residential property insurance market,” Ricardo Lara told CNN.
Lara said his agency would investigate the insurer’s financial situation. No rates changes have been approved.
Securing insurance has already become an issue for homebuyers. In 2023, State Farm announced it would not sign new policies.
Insurance company Allstate was one of the first insurers to pull out of the California market because of wildfires.
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