State Farm Emergency Rate Hike Inquiry to increase alarm bells for some

The state of California recently implemented changes to its house insurance market when the forest fires took place in Los Angeles. Now is the largest insurer in the state Request of an interest rate increase This would affect each of its customers and probably increase the price for covering for everyone else.

It was less than a month since Waldbrand has decimated entire districts in Pacific palisades and other communities in Los Angeles, and now the losses are tabular. State Farm General, California’s largest insurer, said they had received more than 8,700 claims and have already paid more than one billion dollars from the almost exhausted cash reserves.

In a letter to CA Insurance Commissioner Ricardo Lara, the company said: “Although reinsurance will help us to protect the Fragile Insurance Market in California by immediately approving the preliminary interest increases of these submissions, whereby the tariffs on May 1, 2025 are effective … “

Karl Susman, a broker and industry expert, explained the situation.

“The problem is that the industry in California has been turning pretty much upside down for about a decade,” he said. “And it was slowly eroded because the prices did not match the exposure that we had.”

Most people are surprised to find out that California has some of the cheapest house insurance in the country, even though they are now second place for losses. Homeowners pay an average of 2,000 US dollars a year, while it is three times as large in Oklahoma.

State Farm is now applying for an average rate increase of 22 percent for homeowners, 15 percent for tenants and owners of condominiums and 38 percent for those who have rental objects, regardless of where they are in the state. The company announced that the money needed to resume its capital reserve, and its credit rating has raised such a success that the state -owned farm insurance may no longer be accepted by some mortgage companies.

“And this rate increase is really just the beginning,” said Susman. “And I would not say that the premiums are back to pay claims, but it really brings the price to where it should have been all the time, given the exposures we have here. And now ‘,’ we ‘I will see all airlines.

But Harvey Rosenfield, who wrote Prop 103, what regulates the state’s insurance market, said he does not buy hysteria. He said State Farm had an application for request by 30 percent in June, long before the LA was burned.

“Now that the forest fires have happened,” said Rosenfield, “State Farm is trying to use this tragedy to say we really don’t know because they are not justified.”

Rosenfield said State Farm General, the company that assures real estate in California, claims to be bankrupt, while his parent company State Farm is worthy of billions of dollars.

“But State Farm wants to use – with the threat that it is the largest company in the state and its financial illness is terrible – wants to use a rescue operation,” he said. “This forces the public to use capitalization, a private company that actually has access to resources of his parent company, and it is not the public that should save the state farm.”

Anyone who should bear the costs for the forest fires in LA will discuss, but there is no question that the fire risk in California has generally grown. And it seems to be clear that insurers do not resume the writing guidelines in the state until they are sure that they do not lose money.

If the insurance commissioner Lara approved the interest rate increases that could happen in the next few days, they would come into force if the guidelines are renewed from May 1 of this year.