California gives State Farm Insurance Ultimatum

The California insurance regulatory authorities ask the insurers State Farm to expand insurance cover in exchange for interest increases according to the latest forest fires.

Newsweek State Farm contacted to receive a comment by e -mail.

Why is it important

Forest fires in Los Angeles burned more than 47,900 acres last month, destroyed more than 16,250 houses and companies and killed 29 people.

In the middle of the destruction, tens of thousands of people have trained insurance claims to State Farm – the largest house insurer in the state – to millions of dollars. However, the company has announced that interest rate increases to pay all claims and avoid a “bad situation”.

What to know?

The California insurance commissioner Ricardo Lara met on Wednesday with the managers of State Farm in Oakland to discuss the company’s emergency proposal for an interest rate increase and his future in the state.

The State Farm has awarded a nationwide increase of 22 percent for homeowners, 15 percent for tenants and owners of condominiums and 33 percent for rental owners who compensate for forest-related losses of $ 7.6 billion.

While Lara said he hoped to make a decision within two weeks, he also urged the assurance that State Farm would expand covering in California if he was allowed to increase interest rates.

In recent years, the State Farm has insured the back in fire -prone areas and stopped new guidelines.

In April 2024, the company announced plans to stop 72,000 guidelines nationwide, including 30,000 houses, according to KABC in Los Angeles. Among those affected, around 1,600 houses in the Pacific palisades lost the reporting due to the decision.

The cancellations followed nine months before State Farm’s announcement that they would no longer remove the issue of new homeowners’ guidelines in California. At that time, the company said that although the decision to take these measures in order to improve the financial strength of the company, supported the state’s decision to support “wardrope losses”.

In March 2024, the State Farm Vice President Denise Hardin spoke the matter in a letter to Lara. She recognized the difficulty of the decision and described it as “reluctantly”, but it was necessary to secure the future of the company in the face of growing risks.

But now Lara says that the company, if it wants to increase tariffs, must guarantee that it “further expand its footprint and stay in California”.

In a brief explanation, State Farm said that the meeting on Wednesday was an “opportunity, the commissioner” urgency that is necessary to approve the increases. The company did not immediately give an answer to Lara’s demands for guarantees to expand the cover.

State Farm’s request to pay consumers more for house insurance comes from the forest fires of Los Angeles in relation to the financial strength of the company.

The company said as soon as it pays claims from Los Angeles’s fires, its cash surplus of 1.04 billion US dollars will drop to $ 600 million in the late 2024. In the meantime, S&P Global Ratings threatened to promote the insurer’s credit rating, which indicates that the financial stability of State Farm makes investors risky and possibly increases the company’s credit costs.

The Consumer Watchdog based in Los Angeles, a representative group that requested that the tariff requests to be challenged to the insurance department and also participated in the private session, said that State Farm has not demonstrated that the hikes were justified and accused the company “to hide critical financial details”.

Consumer guards told Newsweek At the beginning of this month: “It is not fair that State Farm on the back of homeowners who may have just lost everything on the back pads on the back of home owners.”

State Farm’s most recent request to the supervisory authorities after an increase in interest rose by 30 percent in June. At that time, the company asked for a “deviation” of the insurance department to increase premiums beyond the typical borders. After this request was still excluded, State Farm asked the supervisory authorities to approve a “preliminary” emergency hike after the fires. This application was initially rejected after Lara said that State Farm had not shown an increase in the increase, nor clarified how the additional income would affect the decision to publish the issue of new house guidelines in California.

The new prizes on May 1 would have effective.

What people say

California Insurance Commissioner Ricardo Lara: “I would like to know that if the consumers are asked to pay more, some guarantees are given that (state -gate) will further expand their footprint and remain in California.”

William Plletcher, legal dispute manager at Consumer Watchdog: “State Farm demands a rescue of home owners in California and hides critical financial details.”

State Farm in an explanation on his website: “In the future, the insurance company will cost more for customers in California because the risk in California is higher. Immediate emergency arrest approval of the additional interest rate is of essential importance in order to better align the costs and the risk and to enable the general state to the state farm.

What happens next

Details of the meeting between Lara and State Farm executives were not published. Lara said he would publish a transcript on Thursday. Lara said he will decide on State Farm’s application for interest rate increases in the next two weeks.