A brokered deal with regulators and consumer advocates will allow State Farm General to keep controversial increases in home insurance rates that took effect last year in the wake of the devastating Los Angeles wildfires.<\/p>\n
The agreement sent to a judge late Friday cements a $530-million emergency hike in home insurance rates Insurance Commissioner Ricardo Lara negotiated with the insurer last summer. <\/p>\n
\u201cThe agreement will provide financial relief to many policyholders while ensuring continued coverage for State Farm policyholders while California\u2019s insurance market stabilizes,\u201d the insurance department said in a news release.<\/p>\n
State Farm argued the emergency hike was necessary because catastrophic fire losses jeopardized its financial ratings. <\/p>\n
The company has reported that it paid out $6.2 billion in claims last year, largely from the wildfires, with most of the costs covered through reinsurance payments. The company has told regulators it anticipates to pay an additional $1 billion in claims.<\/p>\n
The deal allows the insurer to keep an average 17% increase in homeowner rates. Local rates for many of the company\u2019s 1 million home customers were much higher. <\/p>\n
However, consumer advocates argued the agreement held the line on even higher increases and halted further policy cancellations that have deepened a crisis in the state\u2019s insurance industry<\/a>.<\/p>\n State Farm, California\u2019s largest home insurer, froze new business in 2023, announced 72,000 mass non-renewals, and sought a series of rate hikes. Its average homeowners premium in California doubled from 2020 to 2024.<\/p>\n Under Friday\u2019s agreement, State Farm agrees to forgo mass non-renewals in 2026 and undergo further review of its rates by 2027.<\/p>\n Additionally, State Farm will be required to return nearly two-thirds of its 15% increase to condominium owners, deliver a small refund to rental property owners and be able to raise premiums for renters a half a percent. <\/p>\n \u201cThis rate enables State Farm General to continue serving existing California customers,\u201d the company said in a statement. \u201cWe will continue to monitor our capacity to support the risks we insure and maintain the financial strength needed to pay claims and support customers and communities when it matters most.\u201d<\/p>\n If approved by an administrative law judge, the settlement will be forwarded to Lara, who is expected to back it.<\/p>\n The arrangement sidesteps efforts to tie State Farm\u2019s rates to its handling of disaster claims.<\/p>\n Under pressure from community advocates and lawmakers, Lara in May had said<\/a> he wanted the two issues evaluated together. <\/p>\n In June, Lara announced his department would conduct an \u201cexpedited\u201d examination into State Farm\u2019s market conduct. In rate hearing proceedings, agency staff sought to block discussion of State Farm\u2019s claims handling in relation to its quest for premium hikes.<\/p>\n The pact does not directly address complaints of unhappy policyholders who say Lara\u2019s administration has failed to hold State Farm accountable<\/a>, which the insurance department has disputed.<\/p>\n A department spokesman said Lara would not comment on the matter while the rate settlement is before an administrative judge.<\/p>\n The Jan. 7, 2025, firestorm destroyed at least 16,000 homes, triggering more than 42,000 insurance claims. State Farm has said it has 13,500 fire and auto claims related to the fires.<\/p>\n