State Farm General warns it is 'considering options' in California amid rate increase row

By Scott Vincent

Feb 19 - (The Insurer) - State Farm General has hit back at California Insurance Commissioner Ricardo Lara’s decision not to immediately grant the insurer approval to implement interim rate increases in the state.

The carrier sent a letter to the commissioner on February 3 requesting permission to immediately implement rate increases that would average 22% for homeowners.

However, a response from Lara on February 14 said State Farm General had not demonstrated why these increases were needed now. The commissioner requested a February 26 meeting with State Farm General to address several concerns around its request.

In its latest response, State Farm General said the lack of approval had sent a “strong message” to the company about the support it will receive to collect sufficient premiums.

“We have gone to great lengths to clearly answer the questions outlined by the commissioner. While we’re positioned to handle all of the claims associated with the most recent wildfires, State Farm General must seriously consider its options within the California insurance market going forward,” the letter said.

The letter stated that State Farm General has already paid out more than $1 billion following the recent wildfires.

“The costs of the January 2025 wildfires will further deplete capital from State Farm General. Capital is necessary so an insurance company can pay for any future claims for the risks it insures.”

State Farm General added that it received a financial strength downgrade last year and warned other downgrades could follow as a result of further capital deterioration from the wildfires.

“If that were to happen, customers with a mortgage might not be able to use State Farm General insurance on the collateral backing for their mortgage.

“Immediate emergency interim approval of additional rate is essential to more closely align cost and risk and enable State Farm General to rebuild capital. We must appropriately match price to risk. That is foundational to how insurance works.”