CA Dept. of Insurance Approved State Farm 20% Home Insurance Rate Increase

The California Department of Insurance approved a request by State Farm Insurance on Wednesday to allow the company to raise all active home insurance rates by 20%.

Throughout 2023, multiple insurance companies operating in California either stopped accepting all new homeowner insurance applications or put severe limits on how many new applications can be accepted in a year.

State Farm became the first company to no longer accept new applications for any kind of insurance other than personal vehicle insurance in May.

In June, Allstate had a similar announcement, saying that they had already stopped accepting new applications.

Farmers was the next to announce in July, reducing the overall number of new monthly policies that they would accept.

Throughout the rest of the year, multiple other insurance companies announced that they would be ending homeowners policies, such as AmGuard and Falls Lake, only further limiting the number of insurance options for homeowners. This is all on top of several insurance companies, such as AIG, leaving the California homeowners insurance market in the past few years, as well as many layoffs in the field.

While many thought that the home ownership insurance decline halted at the end of the year, it instead bled right into 2024 with State Farm’s 20% announcement. According to State Farm, the massive rate change, specific to California only, was made because of rising costs as well as interest rate changes.

“These rate changes are driven by increased costs and risk, and are necessary for State Farm Mutual Automobile Insurance Company and State Farm General Insurance Company to deliver on the promises the companies make,” said State Farm on Wednesday in a statement.

Insurance Commissioner Ricardo Lara also added that the new rates were found  fair and not excessive because of the increased risk that insurance companies have in the state.

“The purpose of the Department is to approve rates so long as they are not excessive, inadequate or unfairly discriminatory,” said Lara. “Yes, the most recent rate change application from State Farm was approved.”

The new rate change for consumers will begin on March 15th, with it being applied to policyholders throughout the year when the policy comes up for renewal.

Experts told the Globe on Thursday that State Farm, the largest home owner insurance company in the state, had little choice in such a hike, and that other companies may follow suit.

“If they were just doing this out of greed, you know they would be called out,” said Trevor Connery, a lobbyist who has worked for insurance companies in the past, to the Globe on Thursday. “But not one lawmaker is coming out against this. Not one agency. Even consumer groups are being quiet here. Everyone knows what the situation is like in California. Now, if they had gone up a ridiculous percentage, then, you know, everyone would be mad. But with the 20% hike, the only people mad are consumers, because that is a lot of money gone.”

“It’s not great for a lot of people, especially if other companies follow the leader. But they are hurting too. Everyone is. Consumers are ultimately just the ones footing the bill.”

Other insurance company rate hike announcements for 2024 are likely to come out soon.