California Orders State Farm To Reduce Homeowners’ And Renters’ Rates

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Insurer also ordered to issue refunds

California Insurance Commissioner Dave Jones issued an order Monday requiring State Farm General Insurance Co. to reduce its dwelling insurance rates by an average of 7 percent, resulting in an estimated $78.6 million in annual savings for California policyholders, according to an announcement by the commissioner’s office.

This follows Jones’s announcement on Oct. 19 that State Farm agreed to reduce its rental dwelling rates statewide by an average of 40 percent, effective Feb. 1.

After State Farm requested a rate increase of 6.9 percent, Jones held a public hearing. Based on the evidence presented during the hearing, Jones determined that “rates charged by State Farm are excessive.”

Jones ordered State Farm to reduce its homeowners' insurance rate by an average of 5.37 percent, its renters' insurance rate by an average of 20.39 percent, and its condominium insurance rate by an average of 13.81 percent — for a total average of 7 percent.

‘Disappointed’ with decision
“State Farm is disappointed with the commissioner’s decision regarding State Farm General Insurance Co. homeowners rates in California. We do not believe the mandated rate reduction and rate refund are lawful, and we are considering our options, including taking legal action,” a spokesman for State Farm told

Not all policyholders will automatically see reduced rates, however. Whether a policyholder receives a decrease and the amount of the decrease depends on a number of factors, including the insured property’s location and other individual risk characteristics and coverage features, Jones said.

Since Jones took office in 2011, the California Department of Insurance has processed nearly 40,000 property and casualty insurance rate filings under Proposition 103, the voter-enacted rate regulation law, the department said.

During this same period, Jones has reduced the overall amount of requested rate increases by $1.093 billion and obtained more than $1.562 billion in rate reductions from insurers, totaling more than $2.655 billion in savings to California consumers and businesses. According to the insurance department, this total includes approximately $975 million in rate reductions for personal auto coverage and $616 million in rate reductions for personal homeowners’ coverage.

Rate regulation in California applies to homeowners', auto, and other property and casualty insurance. Under Proposition 103, which was passed by California voters in 1987, insurers must obtain approval from the insurance commissioner before they increase or reduce rates.

The insurance commissioner approves rates that are intended to be sufficient to cover claims costs, reasonable administrative expenses and a reasonable return for the insurance company, officials said. The commissioner has the authority to reject what he determines are “excessive” property and casualty insurance rates.

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