(NationalUSNews.com) – California continues to clash with major insurance companies with residents of the state suffering the most. State Farm is one of California’s largest insurers and they are now threatening to pull out of the state completely unless they are allowed to enact policy price hikes of 50% or possibly more. California’s Department of Insurance has already approved two rate increase requests from State Farm, and they have already been implemented.
State Farm is not the only insurance company experiencing difficulties in the California market. The second-largest provider of homeowners insurance in the state is Farmers Insurance recently began limiting new policies because of wildfire risk and rising costs. Insurance company Allstate has indicated they will only resume selling new policies in California if state regulators adopt regulatory change which are making it easier for insurers to raise rates. Ricardo Lara, the state Insurance Commissioner has stated that millions of people may be affected by the issue. He added that it may also undermine the integrity of the residential property market in California.
State Farm says they must be allowed to hike homeowner rates by 30% and condominium rates by 36%. They also plan to raise renter rates by 52 percent. A week after their 20% hike in March, the company dropped 72,000 of its California customers. Commissioner Lara has commented that State Farm’s recent filings raise concerns about their financial status, and he is going to “get to the bottom” of the issue. Lara says that there will be an investigation into State Farm’s financial situation and that no price increases will occur until after a rate hearing is held. Members of the public are allowed to comment in rate hearings, and any decisions that are reached can take months to finalize.
State Farm claims to need the price increases to restore its financial condition. They also assert that they are trying to achieve long-term sustainability in California. However, the company recorded a $143.2 billion net worth in 2021 and over $87 billion in yearly revenue. Their annual revenue is in excess of $1.2 billion now. There is clearly more to the story than what is being presented, and hopefully the investigation will reveal what is really going on. It is probable that if the new rate increase request is approved precedent could be set for residential insurance in California going forward.
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