Major Insurer Issues Threat to the State of California

By: David Donovan | Published: Jul 02, 2024

A major insurance provider has issued an ultimatum to the whole state of California.

The firm, State Farm General, requested the state’s Department of Insurance Thursday to allow them to raise private protection rates for millions of residents, or see them move out.

Financial Trouble

The move demonstrates the monetary difficulty for the insurance provider, which presently covers homes destroyed by out-of-control fires.

A State Farm Insurance office in a classic railroad depot building in Hiawassee, Georgia, United States

Wikimedia Commons user Harrison Keely

State Farm revealed it is looking for a 30 percent rate increase for homeowners, a 36 percent expansion for condo owners, and a 52 percent increment for renters subsequently – a move that would only further add to the state’s housing crisis.


Insurance Commissioner

“This has the potential to affect millions of California consumers and the integrity of our residential property insurance market,” insurance commissioner Ricardo Lara said in a statement – as the filings cleared their path through the proper channels.

Ricardo Lara addressing a crowd from a podium on a stage

X user RicardoLara4CA

He went on to say that he was eager to “get to the bottom” of the company’s financial situation and would conduct a thorough evaluation of the applications before making a decision.

Raising Questions

“State Farm General’s latest rate filings raise serious questions about its financial condition,” he said of the most prominent insurance firm in the US.

Ricardo Lara posing for a photo outside in a blazer wearing glasses

X user RicardoLara4CA

He added how a rate hearing might even be required, offering his commission a chance to hear from the general public about the proposed rate changes.

Rate Reviews

Only once hearings had been made, he said, would authorities settle on a choice on whether to support the requests – a process that could wind up requiring months.

Ricardo Lara posing for a picture with two people in an official room with people behind them.

X user RicardoLara4CA

The way things are at present, the office is averaging 180 days for each rate review, with certain cases taking significantly longer, a department representative affirmed to the LA Times.

Wildfire Season

This is mostly because Californians have seen a lot of fires in recent years, and this year’s wildfire season is just starting.

State Farm Insurance at Markham close up of the eaves showing the logo

Wikimedia Commons user Raysonho

The California Department of Insurance had already approved two State Farm requests that resulted in significant increases to homeowners’ home insurance: a 6.9% increase at the beginning of last year and a 20% increase beginning in March.


Company Value

Just months later, the organization is going to the state requesting further increases, after being estimated to have roughly $143.2 billion net worth as recently as 2021.

The State Farm booth at the Gasparilla Distance Classic Expo in 2020.

Wikimedia Commons user Whoisjohngalt

At that point, the firm was creating some $87.6 billion in yearly revenue, and this past February, it gave a statement saying its total net income for the earlier year was a noteworthy $1.2 billion.


Yearly Increases

That was up over 100% from the prior year when the Illinois-based insurance supplier earned $588 million in income.

State Farm Insurance Building ("Fire Building"), Downtown Bloomington, Illinois. Bloomington Central Business District, National Register of Historic Places.

Wikimedia Commons user IvoShandor

State Farm said in one of its filings that the reason for its solicitation was to recover its financial state – offering the following assertion, “If the variance is denied, further deterioration of surplus is anticipated.”


California Difficulties

The insurance provider proceeded to add that it was “working toward its long-term sustainability in California”, showing a potential region of concern among the areas it covers.

State Farm booth outdoors at a festival for Lisa K Maples

Facebook user Lisa K Maples

A week after raising home insurance rates for California customers by 20%, State Farm announced in March that it had decided to drop 72,000 customers in the Golden State due to a crisis it claimed was affecting the entire insurance market.


Climate Change

At the time, Lara implemented new regulations to address the “catastrophic modeling” that the industry seemed to be in desperate need of because of the state’s high wildfire risk and climate change.

Ricardo Lara being interviewed in front of a camera with view of the back of a woman

X user RicardoLara4CA

The move allowed insurers like State Farm to use more forward-looking modeling around its pricing policies rather than basing them solely on past trends. Although the move was initially welcomed by the industry, businesses did not commit to returning to the state.


State Issues

However, State Farm was the first to oppose the idea of automatic coverage in the state, which saw 7,127 fires in 2023.

people walking near fire at night

Unsplash user Issy Bailey

That was somewhat down from the prior year when 7,667 flames desolated California – a relative “quiet” year as per authorities on acreage.


Rain Relief

In 2021, a sum of 8,835 fires were recorded – one of the most at any point on record.

Person holding an umbrella in the rain

Unsplash user Erik Witsoe

The state then experienced multiple fires, including the Dixie Fire, McFarland Fire, Caldor Fire, and others, due to “unprecedented fire conditions,” according to officials.

In October, some reprieve was offered particularly to particularly vulnerable Northern areas, when the state accepted its most memorable downpour in more than 200 days.