SACRAMENTO, CA — California regulators have approved homeowners insurance rate increases for the top two writers of the coverage while a rate increase for the third-highest writer is still pending.

State Farm, Farmers Insurance Group and Allstate all applied for average statewide rate increases of 6.9% in April, said California Department of Insurance spokesman Darrel Ng. State Farm’s requested rate increase was granted at 6.9%. Farmers was also granted an increase, but at 4.1%. Farmers’ 6.9% request "was not warranted," Ng said.

"The wildfires were certainly a factor in leading to these rate increases," Ng said. "In addition, repair costs have risen."

Allstate’s request remains under review by the CDI.

The most recent wildfires in Southern California are said to have caused up to $1 billion in insured loss, according to catastrophe modelers. AIR Worldwide of Boston estimates between $600 million and $800 million in losses. Insurer and modeler First American Corp., said it predicts at least $787 million in losses. The figure could reach $1 billion if contents and additional living expenses are factored in (BestWire, Nov. 20, 2008). Last year, wildfires in October caused $2 billion in insured losses.

State Farm spokesman Bill Sirola said the rate adjustment is due to an increase in costs of claims. The price for repairs from the wildfires and for ordinary homeowners claims, such as kitchen fires or downed trees, have risen. "Rates reflect; they do not invent," Sirola said.

"For some reason, all assorted claims are trending up," he added. "This isn’t just because of the wildfires. There is a lot left in the year after the wildfire season is over."

Ng said that since Insurance Commissioner Steve Poizner took office in January 2007, homeowners rates have gone down about $800 million.

Advocates, Consumer Watchdog, released the news about the rate hikes after the group had challenged them unsuccessfully. Consumer Watchdog petitioned Poizner to hold a rate hearing but the request was denied, they said in a statement.

"We reviewed the proposed rate increases and concluded that they were unjustified," said Douglas Heller, executive director. "The commissioner should not have allowed these insurers to jack up prices like this."

The top five writers of homeowners multiperil in California in 2007, according to A.M. Best Co. state/line product information based on direct premiums written, were: State Farm Group, with a 20.2% market share; Farmers Insurance Group, with 16.8%; Allstate Insurance Group, with 13.3%; California State Auto Group, with 6.7%; and Auto Club Enterprises Insurance Group, with 4.3%.

Contact the author Chad Hemenway, associate editor, BestWeek at: [email protected]