California regulator calls for State Farm to lower “excessive” rates

The insurer’s previous rate increase was considered too high for consumers

Insurance News

By Lyle Adriano

A week ago, California’s insurance commissioner asked one of the state’s major home insurers to reduce its homeowner insurance rates after judging them “excessive”.

State Farm Insurance Company is being asked by California insurance commissioner Dave Jones to lower its rates by an average of 7%, which should result in $78.6 million in annual savings and over $100 million in refunds for policyholders.

In a press release published November 7, Commissioner Jones said that State Farm’s rate increase of 6.9% for homeowner, rental, and condominium insurance rates in July 2015 was just too steep. Jones called for the insurer to lower its homeowner insurance rate by an average of 5.37%, its renter insurance rate by an average of 20.39%, and its condo insurance rate by an average of 13.81%.

Jones said in his statement that protecting consumers from excessive rates is “one of [his] highest priorities.”

State Farm had applied for the rate increases in December 2014, with an effective date of July 2015. Under a voter initiative called California’s Proposition 103, insurance rates that are deemed excessive, inadequate or unfairly discriminatory cannot stay in effect.

A rate is determined to be excessive or otherwise based on the aggregate earned premium the rates are expected to produce, Jones explained.

The insurance commissioner has tackled other pressing insurance matters in recent months. Last June, Jones asked the Department of Justice to block Aetna’s proposed $37 billion acquisition of Humana, reasoning that it would increase costs for consumers and decrease quality of care. He also permitted Shasta Linen Supply to void its contract with Berkshire Hathaway’s insurance unit after it was found that the insurer avoided a state law that required a review of workers’ compensation insurance rates.

California’s Department of Insurance also secured a $200 million settlement from French company Artemis SA and others following allegations that they conspired to conceal a French government-owned bank’s unlawful ownership of the insolvent Executive Life Insurance Co.

Related stories:
Morning Briefing: State Farm ordered to cut rates, refund $100 million
State Farm accused of bankrolling judge to throw out $1B case against company
 

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