California Insurance Commissioner Ricardo Lara denied State Farm's request for "emergency" rate increases that would have meant an average increase of 22% for homeowners.
In a
"The burden is on State Farm to demonstrate that interim relief is warranted under the circumstances," Lara wrote in his letter. "My goal is to make sure policyholders do not have to pay more than is required."
The Golden State has been walloped by natural disasters including record flooding and wildfires over the past several years, which led to
"In light of the recent Los Angeles wildfires," Lara wrote, "State Farm's customers need real answers about why they are being asked to pay more and what responsibility the company's leadership is taking to get its financial house in order."
State Farm officials said in a statement it's "very disappointed the commissioner ignored his department's recommendation" to approve the request for rate increases.
"While we're positioned to handle all of the claims associated with the most recent wildfires, State Farm must seriously consider its options within the California insurance market going forward," company officials said.
State Farm spokesman Steve Baldwin told
In a statement regarding the letter, Lara said he has consistently required full transparency from all parties in the rate-making process to ensure decisions are based on clear and justified data.
The questions Lara would like addressed include: why State Farm's financial position has deteriorated despite previous rate increases, and what other steps, beyond raising rates, the company has taken to restore stability; and what has occurred since State Farm's last rate filing that now requires urgent relief.
He would also like to know how granting the rate hike would affect policyholders, especially those who have already faced premium increases and non-renewals; whether State Farm has provided adequate documentation to justify its claims and if it's considering financial support from its parent company.
"All Californians know from the past 10 years that the risks of wildfire are real and growing," Lara said. The state has "experienced first-hand the ravages of a changing climate" and "we are clear-eyed about the work needed to protect our communities."
He added, state leaders' decision "must be guided by transparent data and an honest reckoning with the challenges we all face together," and his "primary responsibility is to the people of California."
The company has asked for interim rate increases averaging 22% for homeowners, 15% for renters and 38% for condominium owners, saying it had already paid out $1 billion in claims from the Los Angeles County fires so far and expected to "pay out significantly more." It wanted to be able to raise premiums starting in May.
Under Proposition 103, Lara said, insurers must prove that such increases are necessary and not excessive. Despite multiple approved rate changes, State Farm has stopped writing new policies in California and non-renewed thousands of existing policies, raising serious questions about its financial situation, he said.
