State Farm emergency rate increase approved in California

A California administrative law judge approved State Farm General's interim emergency rate increase on May 13, followed on the same day with a confirmation by the state's insurance commissioner.

Consumer Watchdog, which disputed the rate increase, called the decision "a great disappointment for consumers," in a statement by Carmen Balber, the organization's executive director.

"Voter-approved Proposition 103 says a rate hike shouldn't come before the rate justification, but that's what happened here," Balber said in the statement, issued before an approval by the commissioner. "We urge the Commissioner to reject the proposed decision so State Farm policyholders, many of whom are struggling to get their claims paid by the company after the Los Angeles fires, aren't overcharged." 

Judge Karl Fredric J. Seligman of the California Department of Insurance (CDI) Administrative Hearing Bureau issued the decision and sent it to Ricardo Lara, the state insurance commissioner, for his approval. 

Lara announced his approval about two hours later, pointing to a reduction of about 5% from what State Farm first asked for, from 22 to 17%, and State Farm getting $400 million from its parent company to improve its finances and ceasing non-renewals through the end of 2025.

The emergency rate increase is still subject to review in a hearing on State Farm's previously submitted regular rate increase request, scheduled for a hearing in October. 

Under the proposed decision, State Farm's rate hike will be subject to review in a full rate hearing, where the company will be required to fully justify the rate. That hearing is now tentatively scheduled for October.

According to the decision, if the emergency increase is later found to be incorrect, State Farm would issue refunds. "Refunds will be too little too late for homeowners who are already struggling to pay their home insurance premiums," Balber added.