California’s largest insurer has given the state’s government an ultimatum as the cost of providing cover continues to soar. State Farm on Thursday told California’s Department of Insurance to let them raise home insurance rates for millions of citizens, or they will axe cover. The move by the insurance giant comes amid a growing insurance crisis in California.
A slew of insurers – including Allstate, Farmers Direct and State Farm in a previous move – have limited cover or stopped doing business entirely in the Golden State.
They blame the intensifying risk of climate disasters.
As a result, more than half of all Californians say they have been affected by rising property or have been dropped by their insurer in the last year. With so few firms offering cover, they cannot simply move to a new provider.
State Farm disclosed it wants to raise prices by 30 percent for homeowners, 36 percent for condo owners, and 52 percent for renters.
‘This has the potential to affect millions of California consumers and the integrity of our residential property insurance market,’ insurance commissioner Ricardo Lara said – as the filings make their way through the proper channels.
He added how he was now keen to ‘get to the bottom’ of the company’s financial situation – and will conduct an extensive review before deciding on the applications as a result.
‘State Farm General’s latest rate filings raise serious questions about its financial condition,’ he said of the number one insurance firm in the US.
He added how a rate hearing may even necessary, offering his commission an opportunity to hear from the public about the proposed rate changes.
Only then, he said, would officials make a decision on whether to approve the requests – a process that could end up taking months.
As it stands, the department is averaging 180 days per rate review, with some cases taking even longer, a department spokesperson confirmed to the LA Times.
This is largely due to the outsized amount of fires Californians have seen in recent year, with this year’s wildfire season now underway.
The California Department of Insurance had already approved two State Farm requests that saw citizens home insurance rise drastically, including a 6.9 percent hike at the start of last year and a 20 percent rise that began this past March.
Mere months later, the company is going to the state hat-in-hand again, after being pegged to have an approximate $143.2 billion net worth as recently as 2021.
At the time, the firm was generating some $87.6 billion in yearly revenue, and this past February, it issued a statement saying its net income for the previous year was an impressive $1.2 billion.
That was up more than 100 percent from the year before, when the Illinois based insurance provider raked in $588 million in income.
