The state farm seeks to increase the rate of 17 % in California after the forest fire losses.
State Farm is once again demanding an increase in insurance rates in California. After a forest fire in Los Angeles earlier this year, the company says it needs more money to continue. He says the cost of hiding all the damage is far greater than what they are collecting from consumers. At a hearing earlier this week, representatives of the company and the California insurance department tried to make their case to the judge. They have decided to ask for an increase of 17 % instead of the actual 22 %, saying that this is a more reasonable number that still gives them the same thing they need to stay faster.
Catherine Wellington, a state farm, said during the hearing that no company can survive if a company does not pay much. It may feel like a basic business principle, but in the world of insurance, it hardly collides – especially when destructive. If approval is granted, this increase will increase an additional $ 400 million for the company. The State Farm and the Department of Insurance agree that this promotion will help improve the company’s financial affairs right now.
He also promised that if the final approved rate was reduced, the policy holder would not be caught in paying higher price. In this case, they will receive a refund with interest. Looks like a decent deal, but not everyone is sure.
The Consumer Watch Dog, a group that looks for people paying for insurance, does not think the company has done enough to explain why it deserves to increase the rate. William Pletcher, a member of the group, said the hearing should not be the way to get the pass for past mistakes for the state form. He also pointed out that the refund does not really solve the problem. If a company now takes a lot of pay and returns it only later, it does not recover the initial overdose.
Nevertheless, some experts say an increase in this rate may be necessary. Carl Susan, who has worked for years in the insurance industry, explained it in simple terms: People can eliminate paying a few hundred dollars every year, but it is better than not having any coverage. He said that this is not about politics – it is just mathematics. When there is a disaster, insurance companies need enough money to cover claims. If they do not do so, they can completely stop presenting policies, which many homeowners leave without protection.
The hearing is expected to be wrapped soon. The judge cannot make the final decision but can suggest what the insurance commissioner should do. The State Farm is ready to speak more and more people before everything is wrapped up.
For now, homeowners across the state are waiting to see what happens. If the rate increases, it will cost people more to cover their homes. This is a tough pill to swallow, especially when many people are already struggling with living. But if the company cannot really survive without this extra income, the second option may be even worse.
Finally, this debate comes in money, risk and confidence. Can state farms and other companies be trusted to determine fair rates? Can the state protect home owners while keeping insurance companies in business? These are the questions that people want to answer – and soon.
Sources:
California Insurance hearing: State form reduces a low rate increase application to 17 %
The State form requests an increase in emergency rates that can increase California’s premium 38 %
