California's Department of Insurance has given the green light for State Farm to raise policy rates by 20% in 2024 – and other agencies might soon race to raise their premiums, too.
State Farm, which provides insurance for one out of every five homeowners in the state, had threatened to stop selling homeowner’s insurance in California without a rate increase, saying it’s necessary to offset skyrocketing construction expenses and frequent natural disasters.
But Harvey Rosenfield, founder of the advocacy group Consumer Watchdog, says the rate hike is actually driven by greed.
“It’s kind of blackmail,” he told KNX News’ Karen Adams and Rob Archer. “It’s kind of extortion, and it’s worked. They have frightened the lawmakers in Sacramento, and the insurance commissioner, Ricardo Lara, has said that he’s just gonna focus on making people pay what the companies want so that they come back into the marketplace.”
While inflation and supply chain shortages have raised expenses in practically every sector, Rosenfield said insurance companies have still been making “some pretty good profits” in recent years. He also doubts State Farm’s claim that wildfires are driving insurers to insolvency.
“There were a couple of really bad wildfires in 2017 and 2018, and suddenly this year, they’re saying they can’t do business anymore,” he said. “There haven’t been very significant wildfires in L.A. in the last five years.”
Rosenfield said State Farm initially wanted to raise rates by 28%. Consumer Watchdog asked the agency for more information to justify the increase, but State Farm wouldn’t provide any more details.
Although Consumer Watchdog was able to haggle the increase down to 20%, Rosenfield faulted Lara for caving to the company’s tactics.
“From my point of view – as the author of Proposition 103, which regulates the insurance companies – we’re being held hostage,” he said.
Despite the regulatory measures instituted through Prop 103, which passed in 1988, Rosenfield said homeowner’s insurance has become two to four times more profitable in California than in the rest of the nation.
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