California’s deepening home insurance crisis is facing another big moment that could impact millions.
The state’s largest home insurance company, State Farm wants to raise its rates. The company said it’s in a dire financial situation because of the recent wildfires in Southern California.
The wind-driven wildfires in Los Angeles area that started off the year and it destroyed more than 10,000 homes.
State Farm said it paid out more than a billion dollars to customers with more to come.
That’s part of why the state’s largest home insurer of nearly 3 million policies is asking California’s Department of Insurance to immediately approve a rate increase of 22% to the dismay of some homeowners.
“We’re doing the best that we can. I’m not sure why we would have to pay for Southern California,” said homeowner Katherine Munson.
“Nothing has changed in our specific location that i would think would warrant an increase in us personally. So, I’m hoping that it doesn’t,” said homeowner Sally Aaron.
State Farm said insurance will cost more for customers because the risk is greater here.
“The cost of the wildfires will further deplete capital from State Farm General,” the company said in a statement.
State Farm added that the approval is essential to more closely align cost and risk and enable State Farm general to rebuild capital.
A spokesperson for the department said in a statement: “State Farm General’s rate filings raise serious questions about its financial condition.”
They added they plan to investigate to ensure Californians are charged appropriately.
The state has been trying to stabilize the industry to address the growing risk of wildfires and climate change after insurance companies refused to take on new customers or dropped them.
Historic new regulation just last month means insurance companies are permitted to increase coverage in high-risk areas at an amount that can’t exceed an industry standard.
“The new regulations really open things up to have it more of a case to case home by home basis where people can do things to lower their premium they weren’t able to do before,” said insurance agent Karl Susman.
Karl Susman said California home insurance rates have been below the national average and less than some other states.
“The problem is over the last decade or so. Since we’re having so many more of these catastrophic events, the industry was no longer able to support those premiums with those potential for losses,” he said.
Susman said he thinks State Farm and the Department of Insurance will land somewhere in the middle.
Alice J. Roden started working for Trending Insurance News at the end of 2021. Alice grew up in Salt Lake City, UT. A writer with a vast insurance industry background Alice has help with several of the biggest insurance companies. Before joining Trending Insurance News, Alice briefly worked as a freelance journalist for several radio stations. She covers home, renters and other property insurance stories.