MILLIONS of residents will be paying higher premiums thanks to a new insurance development.
An insurance company was given a substantial rate hike.
GettyHomeowners in California may soon experience price hikes on their insurance premiums[/caption]Millions of California residents will soon see steep increases in their home insurance premiums after State Farm was granted a $749 million emergency interim rate hike.
The California Insurance Commissioner approved the request following a three-day hearing in April.
The Commissioner cited the mounting financial toll of the Southern California wildfires.
State Farm, the state’s largest insurance company, will implement a 17% hike for homeowners, a 15% increase for condo owners and renters, and a 38% jump for rental property policies.
Policyholders across the state are bracing for the change, which could add hundreds of dollars to their monthly bills.
Rex Frazier, President of the Personal Insurance Federation of California, acknowledged the hardship but called the increase necessary.
“People are feeling sticker shock… But the alternative is the potential (for State Farm) to be unable to continue doing business and that would be much worse,” Frazier said.
Consumer advocacy groups, however, are pushing back.Carmen Balber, Executive Director of Consumer Watchdog, called the rate hike “outrageous,” criticizing the lack of transparency in the process.
“In California, we say you have to show your math,” Balber said.
The hike follows State Farm’s payouts of more than $1 billion in claims related to the devastating wildfires, with more claims expected in the coming months.
The company argues that the emergency increase is essential to stabilize the California insurance market and avoid further disruption.
However, many homeowners have voiced frustration, citing lowballed, delayed, or denied claims.
Some say the insurer is failing to keep its promises even as it demands more money from its customers.
A judge noted that while the interim hike is subject to further review, it is considered critical to prevent collapse in coverage availability.
A full hearing on the rate increase is scheduled for fall, when stakeholders will re-evaluate the justification and long-term impact.
In the meantime, customers are left scrambling to adjust their household budgets.
Some fear they’ll be priced out of insurance altogether.
Critics warn that if more insurers follow suit, the broader market could see a wave of similar increases.
California has already experienced an exodus of insurers pulling out of high-risk zones altogether.
While the hike may help shore up State Farm’s operations, it has sparked outrage among consumer advocates and policyholders.
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