State Farm, Farmers To Raise California Homeowner Insurance Rates

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Insurance Commissioner Steve Poizner’s decision is denounced by some, but others say recent wildfires make increases reasonable.

Sacramento, CA — As if plummeting real estate values weren’t enough, insurance rates are heading up for many California homeowners.

State Insurance Commissioner Steve Poizner late last month quietly
approved rate-increase requests from two of the state’s three largest
homeowner insurance companies. No. 1 State Farm Mutual got the go-ahead
for a 6.9% increase, its first in five years, while rates at
third-place Farmers Group Inc. will rise 4.1%.

A similar request for a 6.9% increase from No. 2 Allstate Corp. is pending at the state Department of Insurance. The three insurers cover about 2.5 million policyholders, more than half of the insured homes in California.

Some consumer advocates denounced the rate increases.

an economy like this, Californians are relying on the insurance
commissioner to keep premiums as low as possible," said Douglas Heller,
executive director of Santa Monica-based Consumer Watchdog.

Others said they could understand why the
commissioner granted the requests, given the hundreds of wildfires that
have swept the state this year. "I think there is going to be a general
perception out in the world that insurance companies are going to have
to raise their rates," said Amy Bach, executive director of United
Policyholders in San Francisco.

Insurance claims from Southern
California’s three most recent major wildfires, which damaged or
destroyed more than 1,000 homes, could reach $800 million, according to
AIR Worldwide, a Boston firm that estimates catastrophe damage.

rate increases are appropriate, said Poizner spokesman Darrel Ng.
"Unfortunately, insurance rates can’t keep decreasing forever," he
said. "Homeowners’ rates have gone down nearly $800 million since
Poizner took office" in January 2007.

State Farm spokesman Bill
Sirola said the rate hike was justified and was based largely on
documented increases in the costs of repairing damaged structures as
well as a rise in other types of claims covered by homeowner policies.
Those other claims could arise from such disparate causes as a dog
biting a mail carrier or a tree falling on a roof.

State Farm cut rates 6.2% in 2003 and 20% in 2007, Sirola said.

go up and they go down because our primary obligation is to make sure
we’re generating enough revenues to pay our claims and put some money
aside for future catastrophes," he said.

Farmers, which cut its
homeowner premiums 18% in 2006, said it asked for the higher rates
partially to compensate for millions of dollars in claims paid to
victims of Southern California wildfires over the last five years.
Inflation in building material costs and labor are responsible for the
bulk of the rate increase, said Steve Feely, Farmers’ senior vice
president for California operations.

Most of the company’s
360,000 policyholders will see rate increases of zero to 3%, Feely
said. About 1% living in fire-prone zones will see rates jump 20% or
more, while about 27% will see their rates decline.

Watchdog, which unsuccessfully petitioned Poizner to hold a public
hearing on the State Farm and Farmers requests, may ask the
commissioner to reconsider his decisions.

State regulations
require the commissioner to hold a public hearing when a request for a
rate increase exceeds 7%. He has the discretion to waive a hearing when
a proposed rate hike is less than 7%.

Mark Lifsher is a Times staff writer. Contact him at: [email protected]

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