SACRAMENTO, Calif. — Over the past few years, 74-year-old Carol Bentley said it has become harder to afford property insurance on her home in the Sierra Foothills.
“It used to be $1,200 a year,” Bentley said. “Then two years ago, it went up to $4,000, and then it went up to $5,000 a year.”
Bentley is a widow and said she’s currently fighting stage four breast cancer and is on a fixed income of around $2,000 a month.
She said State Farm is her insurer, and she’s been following their emergency request to increase rates that would, on average, raise homeowner property insurance by 22%.
Something she worries about.
“I’m going through my savings just to pay insurance every year, and it’s sort of like, well, what do you do? It’s a real big dilemma,” Bentley said.
State Farm, California’s largest property insurer with about a million customers, requested the rate hike because of payouts from this year’s LA fires, which it estimates will cost the company $7.6 billion.
Though preliminarily approved, the State Insurance Commissioner Riccardo Lara requested a public hearing, citing insufficient justification from State Farm, said State Deputy Insurance Commissioner of Communications Michael Soller.
“Looking at the data that is underlying insurance, State Farm’s rate requests, making sure that they have opened their books,” Soller said. “They’re showing, you know, they’re showing their work.”
Nonprofit Consumer Watchdog is a part of the hearing and said their parent company needs to step in and help financially, not just ratepayers, said their legal director William Pletcher.
“They need to prove that their rates are justified,” Pletcher said. “They need to do it before they charge the rates. This interim process of charging the rate and then maybe if we get it wrong, we’ll have a refund. That just has so many problems.”
At the hearing, State Farm offered to lower the homeowners' rate to 17% and contends the hikes are necessary to ensure its continued insurance coverage in the state.
Currently, their credit rating has been downgraded partly because of the amount of money they have in reserve to payout claims. State Farm legal counsel Katherine Wellington said the company will continue doing business in the state by staying financially stable and having the proper financial strength rating, especially for those with a mortgage.
“It’s people with a mortgage that has to get insurance from a company with a specific financial strength rating,” Wellington said. “And if you know, State Farm General slips below that level, all of these hundreds of thousands of people might have to go out and get other insurance and that may not be available.”
Wellington said the parent arm of the company has agreed to provide $400 million to help with the amount in reserve.
The judge will make a recommendation to the state insurance commissioner, who will ultimately decide on the approval.
Whatever the case, Bentley said she’ll have to figure out if she can still afford coverage or if it’s even a possibility, as many around her have had their policies canceled.
“Last year, even my agent lost his insurance here in town,” Bentley said.
A prospect-like rate increases, she said she’d take it as it comes and do what she can.
