State Farm seeks 22% rate hike amid LA wildfire losses

By Mia MacGregor

Feb 4 - (The Insurer) - State Farm General has requested that the California Department of Insurance immediately approve interim rate increases, including an average 22 percent hike for homeowners.

As of 1 February, the insurer reported receiving more than 8,700 claims related to the recent wildfires and has already paid over $1bn to customers.

In a press release on its website, State Farm noted that it "will ultimately pay out significantly more, as collectively these fires will be the costliest disasters in the history of State Farm General".

The insurer warned that the January 2025 wildfires will further deplete its capital.

To address the financial strain, State Farm urged regulators to approve the rate increases to help stabilise the company’s operations and support more than 2.8mn policies, including 1mn homeowners policies, in California.

Additionally, the company highlighted “the lack of alignment between price and risk”, stating that over the past nine years, it has spent $1.26 for every dollar collected in premiums, resulting in more than $5bn in cumulative underwriting losses.

“We look forward to working alongside regulators, policymakers and industry leaders on creating a sustainable insurance environment in California – one that balances risk and increased rates, ensures long-term market stability and keeps insurers like State Farm General a vital part of California’s future,” the company stated.

Earlier this month, State Farm announced it would renew homeowners policies for another term and pause non-renewals for customers who were on the books as of 7 January and affected by the Los Angeles wildfire outbreak.

In March 2024, the company revealed plans to drop approximately 30,000 property insurance policies and 42,000 commercial apartment policies in California. This move followed its 2023 decision to stop issuing new business and personal property insurance in the state.