State Farm says California rate hike is 'critical first step'

By Isha Marathe

May 14 - (The Insurer) - State Farm General said its emergency interim rate approval is a step in the right direction, but does not necessarily improve the certainty for its customers in the California insurance market.

The insurer was approved for an interim emergency rate increase in the state, granting it a $400 million capital infusion from its parent company, ordered by an administrative law judge and approved by state insurance commissioner Ricardo Lara on Tuesday.

"We are moving forward with implementing this provisionally approved rate and will continue to work with the California Department of Insurance for a sustainable future for the California insurance market," State Farm General said in a statement on Wednesday, calling the interim hike a "critical first step."

In order to improve its financial condition, State Farm said it will continue to pursue a permanent rate adjustment in an upcoming rate hearing.

It will also repay the $400 million surplus note balance along with interest over time, subject to certain conditions, "because customers outside California should not be expected to pay for risks in California," State Farm General said.

In the meantime, the company plans to evaluate its business as conditions change as it pauses new group non-renewals throughout 2025 for non-tenant homeowners, tenants (renters); tenants (condominium unit owners), and rental dwelling properties.

"I expect State Farm (to) provide the highest level of service to its California customers and to fulfill its promises. State Farm must now justify its financial condition and detail its recovery plan in a full rate hearing before a neutral judge and my Department’s experts," said California insurance commissioner Ricardo Lara on Tuesday.

"I am focused on ensuring that State Farm pays its claims to wildfire survivors fully and fairly – and nothing is off the table.”

As of Monday, State Farm had paid over $3.51 billion and handled over 12,692 claims concerning the January wildfires, the company said.