State Farm To Sharply Reduce California Renters’ Insurance Rates In 2017

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California Insurance Commissioner Dave Jones announced on Oct. 19 that State Farm General Insurance Co. has agreed to reduce its Rental Dwelling Program policyholders’ rates statewide by an average of 40 percent, effective Feb. 1, 2017.

According to Jones, rental property owners and small-business clients will see an estimated $101.1 million savings, with an average savings to individual policyholders of about $359 annually.

“This is good news for the approximately 200,000 State Farm rental dwelling policyholders, most of whom will receive a rate reduction as a result,” said Jones. “Thanks to our review and conclusion that the rates as first proposed were excessive, we have obtained from State Farm a record reduction that will enable small businesses and other rental property owners to keep more of their hard-earned money.”

Rate regulation in California applies to homeowners, auto and other property & casualty insurance. Under Proposition 103, which was approved by California voters in 1988, insurers must get approval from the state insurance commissioner before they may increase or reduce rates. The insurance commissioner approves rates sufficient to cover claims costs, reasonable administrative expenses and a reasonable return for the carrier. The commissioner has the authority to reject what it deems to be excessive rates.

How helpful is your state's insurance department website? Most fall short.

Whether a policyholder receives a decrease and the amount of the decrease depends on a number of factors, including the location of the insured property, and other individual risk characteristics and coverage features.

Consumer Watchdog, a Santa Monica, California-based nonprofit, requested that the state's insurance commissioner hold a hearing on State Farm’s application. After discussions with Consumer Watchdog and the Department of Insurance, State Farm subsequently voluntarily agreed to the reduction and no hearing was necessary.

In an email response to PC360's request for comment, State Farm declined to comment on the negotiation and settlement, saying only “The California Department of Insurance (CDI) has approved State Farm General Co.'s 2016 Rental Dwelling policy rate filing. The initial filing was for an overall 26.1 percent statewide average rate decrease. The CDI, a third-party consumer group intervenor, and State Farm reached a settlement agreement resulting in an approved 40 percent statewide average decrease.”

Other companies also had rates reduced

Since Jones took office in 2011, the department has processed close to 40,000 property & casualty insurance rate filings under Proposition 103. During this same period, the commissioner 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 over $2.655 billion in savings to California consumers and businesses.

That total includes approximately $975 million in rate reductions for personal auto coverage and $616 million in rate reductions for personal homeowners’ coverage. The following are a few of the companies that have seen their rates reduced by 20 percent or more by the California Department of Insurance over the past five years:

  • QBE reduced lender-placed homeowner rates by 35 percent.
  • American Assurance Insurance Co. reduced lender-placed homeowner rates by 30.5 percent.
  • American Modern Home reduced lender-placed homeowner rates by 21.3 percent.
  • Great American Assurance Co. reduced lender-placed homeowner rates by 28 percent.
  • Pacific Specialty Insurance reduced homeowner rates by 21.5 percent.
  • California Casualty Indemnity reduced automobile rates by 21.7 percent.
  • USAA General Indemnity reduced automobile rates by 20 percent.

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