California is being threatened by State Farm, the state’s largest insurer, to allow it to raise home insurance rates by up to 50 percent or it will rescind coverage for millions of Californians and leave the state. This comes as the costs to cover in the state are soaring due to increasing wildfire risks and construction costs.
Last summer, State Farm stopped selling insurance to new homes citing the same factors. Other insurers, like Allstate and Farmers Direct, put limits to their coverage or pulled out of doing business in California altogether.
Now, State Farm is seeking a rate increase of 30 percent for homeowners, 52 percent for renters, and a 36 percent increase for condominium owners. It was already approved for a 20 percent hike on homes and condominiums last year.
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The company said its subsidiary, State Farm General, is “working toward its long-term sustainability in California” and explains the rate increases are “driven by increased costs and risk and are necessary for State Farm General to deliver on the promises the company makes every day to its customers.”
“We continue to look for ways to maintain competitive rates and help our customers manage their risk,” a company spokesperson said. “Customers with questions are encouraged to speak with their local State Farm agent. The agent can review the customer’s policy, including deductibles and coverages.”
Meanwhile, the California government is trying to frame it as a problem on State Farm’s part. “State Farm General’s latest rate filings raise serious questions about its financial condition,” said California Insurance Commissioner Ricardo Lara. “This has the potential to affect millions of California consumers and the integrity of our residential property insurance market.”
He added that his office “will investigate State Farm’s financial situation, including a rate hearing on these applications if necessary.” He noted that nothing so far has been decided, and that ultimately the California Department of Insurance has to approve of any policy changes.
Over half of all Californians have been either affected by rising property rates or have been dropped by their insurer in the last year.
Watch Patrick Bet-David break down some recent trends behind spiking insurance rates:
Shane Devine is a writer covering politics and business for VT and a regular guest on The Unusual Suspects. Follow Shane’s work here.
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