Farmers tops survey of home insurers that decline the most claims

Three of California’s largest home insurance companies declined nearly half of their claims in 2023, well above the national average, according to a ratings agency report reviewed by The Times.

In a survey of national claims handled by the state’s leading home insurance companies, affiliates of Los Angeles-based Farmers Insurance topped the list, denying about 50% of claims for payment.

Following close behind were two USAA affiliates, which declined 48% of payment claims; and Allstate Insurance with 46%, according to the report by Weiss Ratings, based in Palm Beach Gardens, Fla.

By comparison, Weiss noted, home insurers across the U.S. in 2023 denied 37% of claims, up from 25% two decades ago, according to data from the National Assn. of Insurance Commissioners.

“It’s not fair for me to say all these [rejected] claims were legitimate, but it’s equally unfair for insurance companies to claim they’re all illegitimate,” said Chief Executive Martin Weiss.

The agency founder believes insurers are rejecting more claims as they are hit with growing climate change-related losses, including hurricanes, floods and wildfires, and trying to raise profit margins.

The issue of how insurers handle claims has become paramount in Los Angeles in the wake of the devastation caused by the Pacific Palisades and other fires that have damaged or destroyed more than 12,000 structures and killed at least two dozen people.

The historic natural disaster has heightened an industry crisis that has caused insurers to pull back from the market and drop policyholders who have since been ravaged by the fires.

Amy Bach, executive director of United Policyholders, a San Francisco-based consumer group, said homeowners need to be wary during the claims process.

“We advise consumers to give insurers the chance to do the right thing but to not be pushovers and realize insurers are for-profit companies and not charitable organizations,” she said.

Several insurers analyzed by Weiss disputed his findings, noting that many claims are closed without payment either because the damage was less than the policies’ deductibles, or was not covered by the policy.

“We protect our customers, and our claims processes help them recover by quickly providing fair payments based on their policies. The data in this report is inaccurate and substantially inflates the rate of unpaid claims,” Allstate said in a statement.

Farmers and USAA and did not respond to requests for comment.

Weiss is an independent ratings agency that says it takes no fees from the insurers it covers, earning revenue on investment advice on stocks, crypto and other sectors. The firm is smaller than A.M. Best Co., Standard & Poors and some other well known agencies.

Weiss drew controversy last year after issuing a report on Florida home insurers that claimed the industry was near collapse due to the devastation caused by a series of hurricanes, which the industry disputed.

That prompted the Florida Office of Insurance Regulation to issue the agency a subpoena demanding to know the sources behind the agency’s conclusion. Weiss stood by his research, issuing a five-page letter documenting sources that included publicly available data, industry reports and media coverage.

Weiss’ California study was based on a survey of national claims by the largest home insurers operating in the state.

Among the companies that performed better in the survey are two affiliates of AAA that do virtually all their business in California. They declined 39% and 28% of the claims, respectively.

“There are good guys,” Weiss said.

State Farm General, the largest home insurer in California, which wrote more than 99% of its policies in California, did not pay 38% of its claims. California Automobile Insurance Co., an affiliate of Mercury Insurance, wrote all its policies in the state and did not pay 34% of those claims, according to the agency.

By contrast, insurers with the highest rate of claims closed without payment — Farmers, USAA and Allstate — may have had more unpaid claims than others because they sell more policies outside the state.

Karen Collins, a vice president at the American Property Casualty Insurance Assn., a large industry trade group, said the numbers could have been skewed by hurricane and flood related insurance claims in the Southeast in 2023.

She said that hurricane evacuees often file claims in advance and can find on returning to their homes that there was no damage. She also said some homeowners who suffer from flooding file claims even though their policies do not cover such damage in order to get denial letters and qualify for federal relief.

“It’s not indicative of what’s going to be occurring here,” Collins said. “Wildfires is a covered peril.”