INSURANCE BLOG

Farmers Insurance: to increase homeowners Insurance Rates

California yet again gets hit with increases in homeowner Insurance Rates

California Insurance Commissioner Steve Poizner has allowed 2 of California’s largest home insurers –State Farm Insurance and Farmers Insurance – to increase insurance premiums by a combined $115 million. State Farm Ins customers will in the near future have an average 6.9% hike and Farmers policyholders’ rates will climb 4.1%, according to recent decisions by the Commissioner. In both cases, the nonprofit Consumer Watchdog had formally challenged the rates and petitioned Poizner to hold hearings pursuant to Proposition 103, but the commissioner rejected those requests.

In a slow economy like this, Californian’s are relying on the insurance commissioner to keep premiums as low as possible, but insurance Commissioner Poizner refused to hold a hearing to investigate rate hikes that will affect more than 2.5 million homeowners. We reviewed the proposed rate increases and concluded that they were unjustified. The insurance commissioner should not have allowed these insurers to jack up prices like this.

At least $20 million of the major increase for State Farm was allowed as an exception to Proposition 103’s strict limit on excessive insurer expenses in order to let the insurance giant charge customers for “higher quality of [customer] service.” Included in Farmers’ rate hike was a special exception to the expense limit for millions of dollars allegedly spent on the company’s fraud prevention efforts. According to our review, the company did not meet the standard required to pass those costs on to policyholders.

We’ve also noted that both State Farm Insurance Company and Farmers Insurance Company are financially well-positioned to pay claims resulting from the recent Southern California wildfires and do not need premium increases to address those losses.

We intend to challenge the Commissioner’s decision allowing Farmers Insurance rate increase and is reviewing the propriety of the State Farm increase.

If the rates take effect, policyholders with State Farm will see an average increase of about $60 per year and Farmers Insurance customers will pay about $30 more on average.

With the slowing economy, many insurers turn to rate hikes Insurance company profits are tied to their investment income and when the economy weakens companies try to push premiums higher in order to maintain high profits. We are concerned that other insurers will press the Department of Insurance for more rate hikes as their investment portfolios tank. As evidence, consider Allstate, which was forced to lower its California homeowners’ insurance rates by about $250 million last spring. Allstate requested a 6.9% rate hike increase for homeowners in September. That proposal is still under review by the Department of Insurance.

While almost everyone is feeling the sting of a bad economy, insurance companies want to pass the pain on to homeowners and other policyholders.
The insurance commissioner stands between these companies and our wallets and Californians need him to be there.

California’s insurance reform law, the Proposition 103, requires insurance companies to open their books and submit to public hearings to prove their rates are adequate without being excessive. Members of the public can challenge any rate hike proposals, and the commissioner must grant a hearing if the requested change exceeds 7%. It is left to the commissioner’s discretion whether or not to initiate a full hearing for changes that are less than 7%, as was the case in the State Farm Insurance and the Farmers Insurance situation.  Get a Free Quote today and lower your insurance rates.

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