California regulators have granted an emergency request from State Farm to increase homeowners’ insurance premiums by 22%, but the approval comes with conditions. The insurance giant must publicly justify its rate hike in a hearing scheduled for April 8.
State Farm, which covers approximately one million homes in California, argued that the increase is necessary to rebuild its financial reserves following the devastating Los Angeles County wildfires, which destroyed over 16,000 buildings. The company warned that without the hike, it could face a “dire” financial situation, potentially forcing thousands of homeowners into the state’s last-resort insurance program.
California Insurance Commissioner Ricardo Lara acknowledged that if State Farm withdrew from the state, other insurers wouldn’t be able to absorb its customers. However, he insisted on greater transparency, requiring the company to present financial data and risk calculations in the upcoming public hearing before a final decision is made.
State Farm has reportedly agreed to halt policy cancellations and non-renewals for one year if the increase is approved. The company had previously announced in 2023 that it would stop issuing new home insurance policies in California and later dropped coverage for 72,000 homes and apartments.
Consumer Watchdog, a consumer advocacy group, opposes the increase, warning that it could cost homeowners an additional $600 annually. The group has vowed to challenge the approval if Lara finalizes the decision. The emergency rate hike also includes a 38% increase for rental property owners and a 15% increase for tenants, set to take effect in June.
Adding to the controversy, a secretly recorded video recently surfaced showing a now-fired State Farm executive discussing the company’s strategy for pressuring regulators into approving rate hikes. The video, released by the O’Keefe Media Group, appears to show Haden Kirkpatrick, State Farm’s former President of Innovation and Venture Capital, admitting that policy cancellations were being used as leverage against California’s Insurance Commission.
The video has intensified scrutiny on State Farm, raising questions about whether the insurer is manipulating the system at the expense of California homeowners. With public frustration mounting, all eyes will be on the April 8 hearing to determine whether the rate hike is truly justified.
“I mean it kind of is, but not in the way you would think,” Kirkpatrick answers, explaining how the company allegedly uses the threat of widespread policy cancelations to pressure the California Insurance Commission into approving its desired rate hikes.
“We’ll go to the Department of Insurance and say we’re overexposed here, you have to let us catch up our rating,” Kirkpatrick continues. “And they’ll say ‘eh’ because the Department of Insurance and the Insurance Commissioner is an elected position in California. He’ll say ‘nah.’ And we’ll say, ‘Okay, then we are going to cancel these policies.’”
