After 40 years of coverage, Judy McDermott has had it with her home insurer, State Farm. In November of 2023, her annual home insurance premium shot up 81% from the year before with no explanation for the jump. In prior years from 2017 through 2022, the rates kept on rising more than 10% each year.  But this was outrageous.

Judy wrote out the check for the new premium and included a letter. 

“Enclosed is my latest homeowner premium to State Farm in the amount of $4689.62, which I am sending under protest,” Judy wrote. “I do not accept an 81% increase in my premium! You raised my premium over 81% from last year’s premium ($2588), which is excessive, unjustified, and which I consider price gouging. I am asking that you reassess this excessive and unjust increase in my premium.

“What is your justification for the 81% increase? What is stopping you from increasing my premiums 81% next year and the year after? Your company is holding consumers captive and abusing your position by charging excessive and unjustified premiums—because you can. This is a greedy corporation at its finest. State Farm is putting the payouts to fire victims on the backs of the consumers in order to enable your company to profit. It is unacceptable.”

She’s been asking questions of both State Farm and the California Insurance Commissioner Ricardo Lara about her rate hike for months. 

She wants to know how State Farm’s rate request was calculated and she wants to see the underlying documents that State Farm used to arrive at her new premium. She wants to know why Lara isn’t doing anything about her 81% rate hike. She wants to know why State Farm’s rate hike is not readily available for her to find online. In her letter, Judy asked for a copy of her latest homeowner policy detailing coverage. She still doesn’t have it. In fact, State Farm has not sent her a copy of her complete home insurance policy since 2021.

 Judy’s house is in a Napa community called Silverado Resort. The area had experienced a wildfire 30 years before and then again in 2017. In 2017, many of her neighbors lost their homes, but hers sustained only minor damage thanks to luck and Judy’s diligence in making sure her property was cleaned of debris. State Farm paid out a $56,337 for damage to her home, but it could have been a lot worse.

Fire prevention and fire hardening by her community has also grown significantly since then. Several years ago, the community cleared out a half mile long culvert at the bottom of her driveway of dead trees, dried bushes and other debris to make the area more fire resilient. The community also completed other wildfire fuel rreduction projects and received a $37.5 million FEMA grant last year to continue that work.

“These areas of fire hardening support the fact that our community is much safer from the threat of wildfire than it was in 2017,” said Judy. “There must be some oversight.”

On November 8, 2023, Judy sent a letter to Lara lodging a complaint against State Farm for excessive and unjustified price gouging.  Three weeks later, she got a response from a representative at the Department of Insurance that her complaint would be reviewed and  State Farm would be asked for a “detailed response.” 

On December 18, she received two letters from State Farm, one from a fire claim team manager detailing that the company had paid out a $56,337 for damage to her home in the 2017 fire. Judy had never asked about that claim when she first sent a letter to Lara. She had asked for detailed justification for an 81% rate increase and she didn’t get it.  

The other letter was from a State Farm Underwriting Team Manager dated December 8, copied to the Department of Insurance and an insurance agent.  The letter failed to explain with specificity the reason for an 81% increase. It contained a spreadsheet and pages of documents listing discounts and policy changes that could have reduced Judy’s premium. The “credits offered” included those for wildfire mitigation, discounts, and new coverage options.

This was when she learned that State Farm was giving a total of 2% to 5% credit maximum for homeowner and community wildfire mitigations while her rate went up 81%.  What State Farm was providing to her was “misleading the Insurance Commissioner into believing they were previously provided to me as the policy holder when I received my 2023 premium notice when in fact they were not,” Judy said. 

State Farm provided Judy with documentation of changes in her  “Zone,” “Subzone,” “Inflation Factor,” and “Location Rating” using numbers and decimal points with no definitions of the categories.  There was no explanation how the changes were determined, what they meant, the effect each change had on her rate increase and what the changes had to do with wildfire risk. Her question asking what dollar amount of her premium increase could be attributed to these factors was never answered. Nor was she told why her premium was raised more than 81% when according to State Farm the average rate increase was less than 7%.

Judy wrote again to Commissioner Lara on January 1 describing the above to him and enclosing her 2023 State Farm rate notice and all the documents that she received.  She wrote that no credits were offered to her in 2023 addressing wildfire mitigation and that she had never seen any of the attachments detailing available credits and options to lower her premium prior to her rate hike. Instead, State Farm’s response made it look like she had gotten advance notice for homeowner and community wildfire mitigation credits in 2023 and that she had not taken advantage of them. That was a lie.

Nor did State Farm’s underwriting team manager address issues in her initial complaint letter outlining all the Napa community efforts to mitigate wildfire risk, what individual homeowners had done to mitigate risk, and what effect that should have had on her premium.  Judy had written Lara about a meeting held at her Napa community with Firewise, a division of the National Fire Protection Association, on wildfire mitigation steps.

“This should have been a clue that the Napa community is part of that program and thus eligible for the credit for community wildfire mitigation,” Judy said. “Doesn’t State Farm have a responsibility to reach out to communities affected by wildfires to determine if they fall under the Firewise USA program, or do they take no responsibility? It can’t be that difficult for them to find out that information and apply savings to eligible policy holders.”

On March 6, Judy got a letter from the same insurance compliance officer who answered her letter to Commissioner Lara.  It stated in part: “The premium you are being charged is correct.” There was no further explanation of why it was correct and the letter failed to provide any answers to her questions or to address her many concerns.

Judy never received a wildfire rating. Her request to have her 81% rate increase reassessed was ignored.