California’s Largest Insurer Issues Ultimatum: Allow 50% Rate Hikes or We’ll Leave the State

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The insur­ance cri­sis in Cal­i­for­nia is deep­en­ing as State Farm, the state’s largest insur­er, has deliv­ered an ulti­ma­tum to the government. 

The com­pa­ny is demand­ing a 30% rate hike for home­own­ers, 36% for con­do own­ers, and a stag­ger­ing 52% increase for renters. If these demands are not met, State Farm threat­ens to with­draw from the Cal­i­for­nia mar­ket entirely.

This move comes as a grow­ing num­ber of insur­ers, includ­ing All­state, Farm­ers Direct, and State Farm itself in a pre­vi­ous action, have lim­it­ed cov­er­age or stopped doing busi­ness in the Gold­en State. These com­pa­nies blame the esca­lat­ing risk of cli­mate-relat­ed dis­as­ters, such as wild­fires, for their decision.

The con­se­quences of this cri­sis are stark — over half of all Cal­i­for­ni­ans have been affect­ed by ris­ing prop­er­ty insur­ance pre­mi­ums or have been dropped by their insur­ers in the last year. With few­er providers in the mar­ket, con­sumers have lim­it­ed options to find afford­able coverage.

The state’s insur­ance com­mis­sion­er, Ricar­do Lara, has vowed to con­duct a thor­ough review before decid­ing on State Far­m’s rate increase requests. He acknowl­edges the poten­tial impact on mil­lions of Cal­i­for­nia con­sumers and the integri­ty of the res­i­den­tial prop­er­ty insur­ance market.

The insur­ance indus­try’s moves sig­nal finan­cial trou­bles, with State Farm itself cit­ing the need to “restore its finan­cial con­di­tion” as a rea­son for the pro­posed hikes. This comes despite the com­pa­ny report­ing a robust net income of $1.2 bil­lion in the pre­vi­ous year.

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