State Farm, the largest homeowners insurance company in California, urgently requested state regulators on Monday (3) to approve an average rate increase of 22%, a concerning sign for an already fragile insurance market in a disaster-prone state.
In recent years, more and more Californians have struggled to secure affordable homeowners insurance as companies have raised their rates or exited the market entirely, with fires and other disasters becoming more destructive. Last month’s fires in the Los Angeles area, which destroyed 12,000 homes, have only heightened these concerns.
State Farm received over 8,700 claims just from the Los Angeles fires and paid out more than $1 billion to customers, according to the company. The insurer expects to pay significantly more, and the fires will be the most expensive in State Farm’s history, the company said.
State Farm General, which insures over a million property owners in California, operates separately from affiliates that provide auto and life coverage. The company has asked state regulators to approve rate increases on renewals starting in May.
“Insurance will cost more for customers in California going forward because the risk is greater in California,” the company said in a statement on Monday. “We must appropriately match price with risk. This is critical to the functioning of insurance.”
The insurance commissioner’s office said it would review State Farm’s rate increase request.
Rate increases and non-renewals of policies in California have pushed a growing number of residents into a special plan created by state lawmakers in 1968 to cover people who cannot obtain standard homeowners insurance for various reasons. The number of homes in the California FAIR Plan has doubled from 2020 to 2024.
Source: The New York Times