A California consumer advocacy group disputed State Farm General's argument that financial strains on the insurer justify its
Consumer Watchdog and attorneys for State Farm General began their presentations in a hearing led by California administrative law judge Karl Fredric J. Seligman at the California Department of Insurance (CDI) Administrative Hearing Bureau in Oakland on April 8, with proceedings expected to continue this week. Consumer Watchdog has intervenor status in CDI's consideration of State Farm's rate increase requests.
Katherine Wellington, an attorney at Hogan Lovells, representing State Farm General, presented figures about the insurer's financial condition, stating that its continued stability is necessary to guarantee viable homeowners insurance coverage in California.
William Pletcher, an attorney for Consumer Watchdog, countered that insurers cannot raise rates just to improve their finances, and that rates must reflect risks and costs, not restoring profits or maintaining credit ratings. "This isn't about fair pricing. It's about padding their corporate balance sheet," he said.
Consumer Watchdog presented an analysis by its own actuary, using State Farm data, that concludes its current rates are within legal limits.
Wellington told Judge Seligman that State Farm General, the California unit of the State Farm parent company, had a $4 billion surplus in 2015 that had decreased to $1.04 billion by the end of 2024. State Farm General also projects another $400 million decrease in this surplus due to the Los Angeles wildfires in January. Some of the figures she presented were
State Farm General amended its interim rate increase request on April 4, reducing the increase from 22% to 17%, with a $400 million capital infusion from its parent company. Consumer Watchdog criticized the amendment, stating that it was filed without supporting information and without enough time for public review, as court orders and regulation require.
"They didn't follow the law, but they lowered the rate and added a capital infusion because they had to respond to the pressure," said Pletcher. "It shows the impact of public participation under Proposition 103 in reviewing rates and protecting consumers—even when insurers won't follow the rules."
Wellington told the judge that the law allows approval of an interim rate increase, with the provision that if the increase is later found to be incorrect, State Farm would issue refunds as required.
Pletcher and Consumer Watchdog dispute the legality and fairness of increasing rates incorrectly. "You can't overcharge now and promise to fix it later," Pletcher said. "Especially when families are still recovering from disasters like the January wildfires."
The increase had been set to take effect May 1, but a full evidentiary hearing is now set for June 1.
