State Farm emergency rate hike will have public hearing

While California insurance commissioner Ricardo Lara has now provisionally approved State Farm's emergency provisional homeowners' rate increase, the insurer will have to justify the increase in a public hearing on April 8.

In a March 11 meeting with State Farm General, the California affiliate of parent company State Farm Mutual, Lara asked the insurer to pause non-renewals and cancellations for all California policyholders through the end of 2025. Lara also asked State Farm General to get a loan or capital from parent company State Farm Mutual, for $500 million, to increase its surplus and improve its risk-based capital ratio.

On February 3, State Farm asked for an emergency 22% average increase in property insurance rates, to take effect on May 1. 

"State Farm claims it is committed to its California customers and aims to restore financial stability. I expect both State Farm and its parent company to meet their responsibilities and not shift the burden entirely onto their customers. The facts will be revealed in an open, transparent hearing," Lara said in a statement. "We will finally get to the bottom of State Farm's financial condition. I am confident that my approach will provide Californians with greater choices in a competitive and stable insurance market—exactly what they deserve."

Consumer Watchdog, the consumer advocacy group registered as an intervenor in the regulator's consideration of State Farm's previously pending rate increase request, cautioned that the provisional approval is not final.

Consumer Watchdog

"A 'provisional' approval is not an approval. The commissioner called a hearing as Consumer Watchdog has been urging since State Farm made its unprecedented request for a $900 million 'emergency' rate hike," said Carmen Balber, executive director of Consumer Watchdog, in an email response. "It's a victory for consumers that State Farm will have to make its case in a public hearing before a judge, and the judge will decide if a rate hike is justified. The company has so far failed to back up its request, and unless State Farm proves otherwise, the outcome of a hearing should be a rejection."

In a March 12 letter to Lara, Consumer Watchdog litigation director William Pletcher stated that State Farm "has acknowledged in its presentation to you at the February 26 informal conference that it has the funds to cover losses from the Los Angeles fires. The additional information provided by SFG concerning its general financial condition has not been subjected to the thorough public review that is required by Proposition 103."