​State Farm Seeks Emergency Insurance Rate Hikes in California After Wildfires 

(Image credit: Getty Images)State Farm General, the largest provider of Fire insurance in California, has requested an emergency rate hike of 22% for homeowners following one of the most expensive natural disasters in U.S. history. The company has already paid out over $1 billion in claims, with more expected in the coming months.In a letter to the California Department of Insurance (CDI), State Farm argues that these increases are necessary to maintain financial stability and continue offering coverage in wildfire prone areas. “This request will help avert a dire situation for our customers,” the company stated.California has an insurance crisis, as residents already pay some of the highest home insurance premiums in the country, and major insurers have pulled back from the market in recent years due to rising wildfire risks. With this latest request, homeowners could face even higher costs and fewer coverage options.Subscribe to Kiplinger’s Personal FinanceBe a smarter, better informed investor.
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Sign up for Kiplinger’s Free E-NewslettersProfit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more – straight to your e-mail.Profit and prosper with the best of expert advice – straight to your e-mail.The growing financial toll of wildfires in CaliforniaThe recent wildfires in California have caused an estimated $135 billion to $150 billion in total damage and economic losses, according to AccuWeather. The Los Angeles region alone saw 12,000 homes destroyed, adding to the growing financial strain on insurers.As of February 1, State Farm General has received more than 8,700 claims, already paying out over $1 billion, with additional claims expected. In a statement, the company emphasized that rate increases are necessary to cover future claims, given the growing risks in the state.However, the California Department of Insurance has raised concerns about State Farm’s financial situation, questioning the justification for these rate hikes. “To protect millions of California consumers and the integrity of our residential property insurance market, the Department will respond with urgency and transparency to recommend a course of action for Commissioner Ricardo Lara,” CDI stated.Currently, there is no proposed timeline for approval or denial of State Farm’s request.State Farm is proposing substantial rate hikes across different property types, including:22% increase for homeowners15% increase for renters and condo ownersUp to 38% increase for rental dwellingsThe company cites rising wildfire risks and mounting financial losses as justification, claiming these increases are crucial to offset claims and ensure long-term stability.However, consumer advocacy groups like Consumer Watchdog, have strongly opposed the request. Critics argue that homeowners should not bear the burden of corporate losses, especially when State Farm’s parent company holds $135 billion in reserves. They als