Troubled State Farm seeking a 39% rate hike for umbrella policies
- Share via
State Farm General, already seeking an emergency 22% rate hike for its homeowners insurance, has asked California regulators for an even larger increase for its add-on umbrella insurance.
The state’s largest home insurer has filed for a 39% premium hike for its California Personal Liability Umbrella program, which provides homeowners additional coverage arising out of a variety of situations — including slip and falls in their home, damage to another person’s property, serious auto accidents or even cases of libel and slander.
If the California Department of Insurance grants the increase, it would take effect on Aug. 1 and follow a 29% increase that has been in force since March 1. Last year, the company also was granted increases for the umbrella policy of 15% and 40%, the first rate hikes since 2020.
California Insurance Commissioner Ricardo Lara decided Friday to provisionally grant State Farm General’s request for a 22% hike in its homeowner insurance rates pending a formal rate hearing next month.
The company said it is asking for the increase because “personal liability costs have risen dramatically across the industry due to more accidents, escalating medical bills and larger legal settlements,” as well as a higher number of claims.
State Farm General is already seeking the emergency rate hike for its homeowners coverage following the Jan. 7 fires in Pacific Palisades, Altadena and elsewhere in L.A. County.
State Farm General said Monday it has paid almost $2.5 billion on more than 10,000 fire claims and expects to ultimately pay some $7.6 billion. However, it has said its net losses from the fires will be closer to $600 million after reinsurance payments largely from its parent.
State Insurance Commissioner Ricardo Lara “provisionally” granted the 22% rate hike last month, but also called for a public hearing set for April 8 before an administrative law judge, who will make a proposed decision that Lara can accept, reject or revise.
State Farm General has stopped renewing thousands of policies statewide, and Lara has called on the insurer to halt that process. He also wants the insurer’s parent company to provide it with $500 million to stabilize its capital position.
The largest home insurer in California seeks approval of a 22% emergency rate hike even as it faces complaints over its handling of insurance claims.
Janet Ruiz, a spokesperson for the Insurance Information Institute, declined to comment specifically on State Farm’s request for a rate hike for its umbrella liability coverage.
But she said costs for umbrella liability policies have risen dramatically for all insurers — even though annual premiums are usually just a few hundred dollars for $1 million to $2 million in coverage for policyholders, who typically must have homeowners and auto coverage with the insurer.
Among the largest cost drivers, she said, are rising medical expenses, which are associated with a variety of claims, including dog bites, slip and falls on a homeowner’s property and auto accidents (when a homeowner’s auto policy limits are exceeded).
“When all those things are rising then we have to pay those losses,” she said.
Other cost drivers are the increasing severity of auto accidents since the COVID 19 pandemic and even costs associated with libel and slander claims, which are more common now with the rise of social media, she said.
Inside the business of entertainment
The Wide Shot brings you news, analysis and insights on everything from streaming wars to production — and what it all means for the future.
You may occasionally receive promotional content from the Los Angeles Times.
