State Farm seeks 17% rate hike in California after wildfire losses.
State Farm is asking for an insurance rate hike again in California. After the wildfires that swept through Los Angeles earlier this year, the company says it needs more money to keep going. They say the cost of covering all the damage is more than what they’ve been collecting from customers. At a hearing earlier this week, representatives from the company and the California Department of Insurance tried to make their case to a judge. They’ve settled on asking for a 17% increase instead of the original 22%, saying it’s a more reasonable number that still gives them what they need to stay afloat.
Kathryn Wellington from State Farm said during the hearing that no company can survive if it keeps paying out more than it takes in. That might sound like a basic business rule, but in the world of insurance, it hits hard—especially when disasters keep happening. If approved, this increase would bring in an extra $400 million for the company. State Farm and the Department of Insurance agree that this boost would help improve the company’s finances right away.
They also promised that policyholders wouldn’t be stuck paying more if the final approved rate ends up being lower. In that case, they’d get a refund with interest. Sounds like a decent deal, but not everyone’s convinced.
Consumer Watchdog, a group that looks out for people paying for insurance, doesn’t think the company has done enough to explain why it deserves the rate increase. William Pletcher, a member of the group, said the hearing shouldn’t be a way for State Farm to get a pass for past mistakes. He also pointed out that refunds don’t really solve the issue. If a company charges too much now and only gives it back later, that doesn’t make the initial overcharge right.
Still, some experts say this rate increase might be necessary. Karl Susman, who’s worked in the insurance industry for years, explained it in simple terms: people might end up paying a few hundred dollars more each year, but that’s better than not having any coverage at all. He said it’s not about politics—it’s just math. Insurance companies need enough money on hand to cover claims when disasters happen. If they don’t, they could stop offering policies altogether, which would leave a lot of homeowners with no protection.
The hearing is expected to wrap up soon. The judge can’t make a final decision but can suggest what the Insurance Commissioner should do. State Farm is ready to bring in more people to speak on its behalf before everything wraps up.
For now, homeowners across the state are left waiting to see what happens. If the rate increase goes through, it’s going to cost people more to keep their homes covered. That’s a tough pill to swallow, especially when many are already struggling with the high cost of living. But if the company really can’t survive without this extra income, the other option could be even worse.
In the end, this debate comes down to money, risk, and trust. Can State Farm and other companies be trusted to set fair rates? Can the state protect homeowners while keeping insurance companies in business? Those are the questions people want answered—and soon.
Sources:
California insurance hearing: State Farm lowers rate hike request to 17%
State Farm requests emergency rate hike that could raise Californians’ premiums by 38%
Join the conversation!