CALIFORNIA – State Farm General announced that it asked the California Department of Insurance (CDI) to immediately approve interim rate increases, including a 22% average for homeowners.
The company said as of February 1st, State Farm General (Fire only) has received more than 8,700 claims and has already paid more than $1 billion to customers.
“State Farm General will ultimately pay out significantly more, as collectively these fires will be the costliest disasters in the history of State Farm General,” said the company in a statement.
Property damages estimated to exceed $30 billion
State Farm said insurance will cost more for customers in California going forward because the risk is greater in California.
According to CoStar, the Palisades and Eaton fires destroyed over 11,000 structures, with property damages estimated to exceed $30 billion.
State Farm said the costs from these January 2025 wildfires will further deplete their capital.
“Capital is necessary so an insurance company can pay for any future claims for the risks it insures. Last year, one rating agency downgraded State Farm General’s financial strength rating due to its capital position,” said the company.
They go on to say that if the wildfires cause more financial trouble for them, their rating could drop again. If that happens, people with mortgages might not be able to use State Farm insurance for their home loans.
Rate changes will be effective after May 1, 2025
The company says it needs quick approval to raise rates so they can better cover costs and risks. This will also help them rebuild their finances.
“Over the last 9 years, the lack of alignment between price and risk means that for every $1.00 collected in premium, State Farm General has spent $1.26, resulting in over $5 billion in cumulative underwriting losses,” said the company.
State Farm has been waiting for approval to raise its rates since June 2024. If approved, the new rates will start for policy renewals after May 1, 2025.
