The state of California recently implemented changes to its home insurance market when the forest fires took place in Los Angeles. Now is the largest insurer in the state Requesting a rate increase That would affect all his customers and probably increase the price of coverage for everyone.
It is less than a month since Natuurbrand decimated entire neighborhoods in Pacific Palisades and other communities in Los Angeles, and now the losses are in tabular form. Staatsboerderij -General, the largest insurer of California, said they have received more than 8,700 claims and have already paid more than a billion dollars of the almost exhausted cash reserves.
In a letter to Ca -Insurance Commissioner Ricardo Lara, the company said: “Although reinsurance will help us pay what we owe customers, the costs of these burning capital will further expand from SFG … We ask you to need to need to need Entrepreneurship to help protect the fragile insurance market of California by immediately approving the interim rate increases, with rates in force on 1 May 2025 … “
Karl Susman, a broker and industry expert, explained the situation.
“The problem is that the industry in California is virtually upside down for about ten years,” he said. “And it is slowly eroded because prices do not match the exposure we have had.”
Most people are surprised to hear that California has one of the cheapest home insurance in the country, even though it is now in second place due to the risk of loss. Homeowners pay an average of $ 2,000 a year here, while in Oklahoma it is three times that amount.
So now State Farm asks for an average interest rate increase of 22 percent for homeowners, 15 percent for tenants and condo owners and 38 percent for those who own rental properties, regardless of where they are in the state. The company said it needs the money to refill its capital reserve and said that its creditworthiness has taken such a hit that the state band insurance can no longer be accepted by some mortgage companies.
“And this speed increase is actually just the start of that,” said Susman. “And I would not say that it is Bacque premiums to have the opportunity to pay claims, but it really yields the rate where it should always have been, given the exposures we have here. And now, we ‘we All carriers start to do.
But Harvey Rosenfield, who wrote Prop 103, who regulates the state insurance market, said he does not buy the hysteria. He said that State Farm already had a request to the state for an increase of 30 percent in June, well before the LA Brand.
“Now that the forest fires have happened,” said Rosenfield, “State Farm is trying to take advantage of this tragedy to say that they need an immediate increase in emergency speed of 22 percent, which can be 3/4 of a billion dollars. We know really not because they have not justified. “
Rosenfield said that State Farm General, the company that ensures characteristics in California, claims to have been broken, while the parent company, State Farm Mutual, is worth hundreds of billions of dollars.
“But State Farm wants to use – with the threat that it is the largest company in the state and his financial situation is terrible – wants to use a rescue plan,” he said. “This forces the public to capitalize a private enterprise, to finance, who actually has access to resources from her parent company. And it is the parent company that should save the state farm, not the public.”
Anyone who has to bear the costs of the La Wildfires is under discussion, but there is no doubt that the risk of fire in California has generally grown. And it seems clear that insurers will not resume writing policy in the state until they know for sure that they will not lose any money.
If insurance commissioner Lara approves the tariff increases, which can happen in the coming days, they would be extended from 1 May this year when the policy is being extended.