California homeowners face potential hikes as State Farm defends wildfire rate increase

SAN DIEGO — State Farm, California’s largest home insurance provider, has requested a 22% emergency rate increase from state regulators, citing financial strain following the recent Los Angeles wildfires. 

This request comes just six months after a pending 30% rate hike application, potentially impacting millions of California homeowners.

The insurance giant, which covers approximately one in five California households, reported receiving 8,700 claims from last month’s wildfires that destroyed 12,000 homes in the Los Angeles area. State Farm has already paid out over $1 billion to customers and said it  expects this figure to rise significantly.

Karl Susman, an independent insurance agency owner in Los Angeles, described the situation as “the Petri dish for what the industry has been fearful of for a long time.” 

He told CBS 8, “If they can’t get the appropriate premium for the risk if there is a large event, where is the money going to come from? And we are literally living that right now.”

State Farm defended its request in a statement, saying, “Insurance will cost more for customers in California going forward because the risk is greater in California. Immediate emergency interim approval of additional rate is essential to more closely align cost and risk and enable State Farm General to rebuild capital,” adding that “We must appropriately match price to risk. That is foundational to how insurance works.”

However, consumer advocates have criticized the move. Carmen Balber, executive director of Consumer Watchdog, called the request “outrageous,” adding, “State Farm is taking advantage of this tragedy to try to impose a massive rate hike on California homeowners, many of whom have been devastated by these fires.” 

Balber also pointed out that State Farm’s parent company has a $130 billion surplus, suggesting it should intervene rather than burdening California homeowners.

“If State Farm is in financial straits,  the parent company should be stepping in, not California homeowners, many of whom just suffered a tragedy,” she told CBS 8.

The California Insurance Commissioner’s office acknowledged the seriousness of the situation, stating, “State Farm General’s rate filings raise serious questions about its financial condition. To protect millions of California consumers and the integrity of our residential property insurance market, the Department will respond with urgency and transparency.”

There is currently no official timeline for when State Farm’s rate application will be approved or denied.