Homeowner insurance rates are expected to increase again in California following last month's deadly wildfires.
On Monday, State Farm announced that it is requesting that state officials approve rate hikes that raise rates by an average of 22% per household. In the wake of last month's wildfires, State Farm said it has paid out 8,700 claims totaling $1 billion.
State Farm expects to process additional claims pertaining to the Eaton and Palisades Fires that ravaged the Los Angeles area. State Farm said it expects the fires to combine to be the costliest natural disaster in the company's history.
"Insurance will cost more for customers in California going forward because the risk is greater in California," State Farm said. "Immediate emergency interim approval of additional rates is essential to more closely align cost and risk and enable State Farm General to rebuild capital. We must appropriately match price to risk. That is foundational to how insurance works. Higher risks should pay more for insurance than lower risks. Over the last 9 years, the lack of alignment between price and risk means that for every $1 collected in premium, State Farm General has spent $1.26, resulting in over $5 billion in cumulative underwriting losses."
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State Farm has long noted its struggles to insure Californians due to wildfires. In 2023, the company announced it would no longer accept new homeowner and property insurance policies in California, citing the state’s wildfire risk and construction costs outpacing inflation.
In 2022, California Insurance Commissioner Ricardo Lara submitted new insurance pricing regulations requiring insurance companies to provide discounts to consumers and other specific protections. Among them, insurance companies face a mandatory one-year moratorium on canceling or non-renewing residential insurance policies in certain areas.
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The protections also promised larger payouts for some consumer claims, less red tape from insurance companies, and more help for people under evacuation orders.
