This week, State Farm General, the company’s California subsidiary, submitted a request to the California Department of Insurance to raise its homeowners insurance rates by an average of 30% for homeowners, 52% for renters and 36% for condominium owners. If approved, the rate increase would be State Farm’s largest in at least seven years, according to the company’s filings.
The filing relies on a rarely-used regulation known as a “variance request” that would allow State Farm to increase its prices more than normally permitted “in order to protect the insurer’s solvency.”
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State Farm — which insures one in five homes in California — last raised its rates by an average of 20% statewide in March. That month, it also announced it would not renew approximately 30,000 homeowner policies on top of 42,000 commercial landlord policies in order to reduce its exposure to risk. For the past year, it also hasn’t offered new homeowner policies for the same reason.
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The insurer hinted at the possibility of insolvency in March, when executives wrote a letter to the Department of Insurance to say the company’s “capital position has been severely deteriorated, and we are increasingly concerned about its financial well-being.” Later that month, AM Best — a credit-rating agency for insurance companies — downgraded State Farm’s financial strength rating from excellent to fair and deemed the outlook of its long-term issuer credit rating to be negative.
In its letter to the department, later disclosed in state filings, State Farm wrote that it was facing increased losses due to water damage and liability claims, on top of billions spent in 2017 and 2018 due to a series of catastrophic wildfires.
I think the bit that will potentially reassure the insured is this bit, buried at the end of the article: This would be great, in that if approved, such raises in insurance rates could at least be...
I think the bit that will potentially reassure the insured is this bit, buried at the end of the article:
As part of the variance request, State Farm will be required to prove that it has reduced or gone without paying dividends to its stockholders and policyholders and that it has a plan to reduce rates in the future once it is financially stable.
“Using my authority under Prop. 103, I will investigate State Farm’s financial situation, including a rate hearing on these applications if necessary. My Department’s experts and I have serious questions,” Lara said in a statement, adding, “We will use all the Department’s investigatory tools to get to the bottom of State Farm’s financial situation. We take this process seriously.”
This would be great, in that if approved, such raises in insurance rates could at least be accepted with the proof of the insurer's financial situation actually requiring them. Unfortunately, the Department of Insurance's ability to actually review such requests has been recently hampered by Newsom, who cut the timeline for such review by a third, forcing an automatic approval if they can't finish the review in the new, shorter timeline.
I don't see how anyone could make a guarantee that rates will go down again. We don't know the future, but it seems unlikely? Requiring an insurance company to make such an argument and for the...
I don't see how anyone could make a guarantee that rates will go down again. We don't know the future, but it seems unlikely?
Requiring an insurance company to make such an argument and for the Department of Insurance to pretend to believe it isn't going to change the future insurance claims that need to be paid. More review doesn't give anyone any better options. It's about reassuring people that yes, the rate increases really are necessary.
Maybe we will get lucky and there won't be any big fires for a while, but the things that could be done about it are not under the control of either State Farm or their regulator. It's bigger than them.
It's not a guarantee that rates will go back down, unless State Farm in California starts to show significant levels of shareholder dividends or profit. But yeah, I'm definitely going to feel...
It's not a guarantee that rates will go back down, unless State Farm in California starts to show significant levels of shareholder dividends or profit. But yeah, I'm definitely going to feel better with someone who doesn't have a financial interest in the rate increases signing off on them as necessary to maintain insurance coverage as opposed to there to line the pockets of the shareholders.
I made a topic about congressional testimony about how homeowners' insurance becoming unprofitable has become a nationwide trend. You may find it interesting, especially its connections to the...
From the article:
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I think the bit that will potentially reassure the insured is this bit, buried at the end of the article:
This would be great, in that if approved, such raises in insurance rates could at least be accepted with the proof of the insurer's financial situation actually requiring them. Unfortunately, the Department of Insurance's ability to actually review such requests has been recently hampered by Newsom, who cut the timeline for such review by a third, forcing an automatic approval if they can't finish the review in the new, shorter timeline.
I don't see how anyone could make a guarantee that rates will go down again. We don't know the future, but it seems unlikely?
Requiring an insurance company to make such an argument and for the Department of Insurance to pretend to believe it isn't going to change the future insurance claims that need to be paid. More review doesn't give anyone any better options. It's about reassuring people that yes, the rate increases really are necessary.
Maybe we will get lucky and there won't be any big fires for a while, but the things that could be done about it are not under the control of either State Farm or their regulator. It's bigger than them.
It's not a guarantee that rates will go back down, unless State Farm in California starts to show significant levels of shareholder dividends or profit. But yeah, I'm definitely going to feel better with someone who doesn't have a financial interest in the rate increases signing off on them as necessary to maintain insurance coverage as opposed to there to line the pockets of the shareholders.
I made a topic about congressional testimony about how homeowners' insurance becoming unprofitable has become a nationwide trend. You may find it interesting, especially its connections to the wider financial markets.