State Farm is dealing a double whammy to its policyholders in California. After recently announcing that it won’t renew coverage for 72,000 properties, the insurance giant is proposing to increase its premiums by up to 52 percent. This move is sure to significantly impact policyholders in the Golden State, who will be left with the tough decision of either paying the higher premiums or finding alternative coverage options.
According to the San Francisco Chronicle, State Farm holds a significant 8.7 percent share of all home insurance policies in California as of 2022. Recently, the insurance giant has requested permission from the state government to increase its rates for homeowners by 30 percent, condo policies by 36 percent, and renters’ policies by 52 percent. As per NBC Los Angeles’ report, State Farm has included these proposed hikes in its filing with the state Department of Insurance.
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According to Bankrate.com, California residents pay an average annual insurance premium of $1,453, which is comparatively lower than many other states, even those that face similar climate-related risks. For instance, homeowners in Florida pay a significantly higher average annual premium of $5,533.
Although California’s rigid laws have prevented insurance providers from massively increasing their rates, homeowners in the state have recently experienced a surge in premiums. Insurers have reduced coverage in the regions most susceptible to severe weather events, causing this increase. State Farm’s proposal for significant rate hikes is expected to worsen the state’s property insurance crisis, affecting roughly 1.2 million households.
According to a statement given to NBC Los Angeles, State Farm stated that their adjustments in rates are a result of rising costs and risks, which are crucial for State Farm General to fulfill the commitments made to its customers. They further mentioned that they are constantly exploring options to keep their rates competitive and assist customers in managing their risk.
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In an effort to safeguard against potential losses associated with the escalating threat of wildfires in Illinois, the insurer based in the state is taking precautionary measures. State Farm had to bear net losses exceeding $6 billion over the last couple of years due to a surge in homeowners’ claims incurred from catastrophic events, as stated by the company in February.
Before implementing the sought-after rate increases, State Farm must wait for official approval from the California Department of Insurance (CDI). It may take the department several months to make a decision.
On Tuesday morning, we sent an email to State Farm and the CDI requesting comment, as per our communication policy at Newsweek.
In a statement to Insurance Journal, a representative from CDI expressed concerns over State Farm’s financial stability, citing the insurance company’s request for increased rates. The CDI spokesperson emphasized the potential impact on millions of California residents and the overall integrity of the residential property insurance market.
