By Megan Fan Munce, SAN FRANCISCO CHRONICLE
https://www.sfchronicle.com/california/article/state-farm-car-insurance-19964552.php
Drivers insured by State Farm can expect to see their rates rise by double digits for the second year in a row in 2025.
On Friday, the insurer — California’s largest — was approved to raise rates on personal auto insurance by an average of 17.7% starting at the end of January, filings with the California Department of Insurance show. About 4 million customers will be affected, according to the filing.
State Farm last raised auto rates by 21% in February 2024, but applied for an additional rate increase in April. The company told regulators that the 21% rate hike was not enough to cover increased costs caused by lingering supply chain issues from the COVID-19 pandemic and labor shortages, which it says have driven up the cost of auto repairs and car values.
“Rate changes are driven by increased costs and risk and are necessary for State Farm Mutual Automobile Insurance Company to deliver on the promises the Company makes every day to customers,” a spokesperson said in an email to the Chronicle. “We continue to look for ways to maintain competitive rates and help our customers manage their risk.”
At the beginning of the pandemic in 2020, Insurance Commissioner Ricardo Lara ordered auto insurers to partially refund customers’ paid premiums because fewer people were driving — and subsequently, getting into accidents — due to shutdown orders.
State Farm accordingly returned $614 million to its customers through dividends, and lowered its auto rates by 6.5% starting in September 2020, according to its filings.
Since then, several major insurers, including GEICO, Nationwide and AAA, have filed for large rate increases to reflect increased costs. Last February, Allstate raised its auto insurance rates by 30%.
In its filing, State Farm wrote that it paid out less in claims during the pandemic, but has since seen a return “towards or beyond pre-pandemic levels.”
State Farm initially applied for a 23.4% rate increase. But Consumer Watchdog, a consumer advocacy group, objected to the filing through California’s public intervention process, according to the group’s Executive Director Carmen Balber. The process allows outside groups to provide further scrutiny on insurers’ rate filings and to be compensated for the analysis they do by the insurers, according to Deputy Insurance Commissioner Michael Soller. After holding discussions with State Farm, the Department of Insurance and Consumer Watchdog, State Farm lowered its request to 17.7%. The smaller request means consumers will pay $326 million less in premiums than they would have under the original request, Balber said.
The majority of affected customers will see rates go up between 15% to 20%, according to the filing. Others may see rates rise by as little as 0.01% or as much as 30%.
The approved auto rate request is unrelated to State Farm’s ongoing requests to raise home insurance rates by 30% for homeowners, 52% for renters and 36% for condominium owners in a move it claims is necessary to avoid potential insolvency. That request is being made by State Farm General, the insurer’s California-only subsidiary, while auto insurance in the state is written by State Farm Mutual, its national parent company.
State Farm General’s home insurance rate request, first submitted in June, is still being reviewed by the Department of Insurance.