State Farm, California's largest insurer, is threatening to leave the state unless its Department of Insurance allows the company to raise home insurance rates for millions of residents.
Competitors Allstate and Farmers Direct have made similar moves in recent months by limiting coverage in California or leaving the state entirely due to the government's insurance rate caps.
State Farm and the others claim that climate change is causing more disasters that require rate hikes of 50 percent or more. Many Californians no longer have home insurance coverage at all because insurers are fleeing the state in protest and there are no alternatives.
State Farm General has issued an ultimatum for all of California. The company wants to hike homeowner rates by 30 percent, condominium rates by 36 percent, and renter rates by a whopping 52 percent – and unless this is allowed, State Farm will leave the Golden State.
"This has the potential to affect millions of California consumers and the integrity of our residential property insurance market," commented insurance commissioner Ricardo Lara, who says he is determined to "get to the bottom" of State Farm's financial situation.
"State Farm General's latest rate filings raise serious questions about its financial condition," Lara added about the number-one insurance firm in the United States.
(Related: Major insurance companies are adding exclusions to policy coverage for riots, insurrection, war.)
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Is State Farm struggling financially to survive?
The next step is to hold a rate hearing to allow Lara's commission to hear from members of the public about the proposed rate changes. After that, the commission will make a decision that could take months to finalize.
Right now, the average amount of time it takes for the commission to approve or deny requests is 180 days. Some cases are taking even longer than that due to the number of large fires California has seen in recent years.
The Department of Insurance in California has already approved two rate hike increase requests from State Farm, which resulted in some state residents seeing massive policy increases. The first hike was 6.9 percent at the start of the year followed by another 20 percent hike in March.
Now, State Farm is requesting a third rate hike even though the company is supposedly worth around $143.2 billion as of 2021.
"At the time, the firm was generating some $87.6 billion in yearly revenue, and this past February, it issued a statement saying its net income for the previous year was an impressive $1.2 billion," reported the UK's Daily Mail Online.
"That was up more than 100 percent from the year before, when the Illinois based insurance provider raked in $588 million in income. Still, such a move usually signals an insurance carrier is struggling."
In one of its requests, State Farm claimed that the purpose of its request is to restore its financial condition, providing the following statement:
"If the variance is denied, further deterioration of surplus is anticipated."
State Farm further stated that it is currently "working toward its long-term sustainability in California," this suggesting that the company is facing financial problems.
Back in March, State Farm dropped 72,000 of its California customers, this just one week after being granted permission to jack up policy rates in the state by 20 percent.
Farmers Direct Insurance fled California in 2023, which followed Allstate's departure in 2022. Should California roll out new rules to help these carriers mitigate their risks, some could end up returning.
Once the economy really starts to freefall, insurance companies won't want to cover anyone anywhere. Find out more at Collapse.news.
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