Consumer Watchdog delivers its closing argument today in a high-stakes hearing before the California Department of Insurance, urging the Insurance Commissioner to reject State Farm’s emergency request for an interim increase in homeowners insurance rates. The consumer advocacy organization argues that State Farm failed to meet the legal standard required under California law to justify a mid-proceeding rate hike, and that the proposed settlement would unfairly burden consumers without resolving the insurer’s financial issues.
“No insurer, not even one as large as State Farm, is exempt from the requirements of Proposition 103,” said William Pletcher, Litigation Director at Consumer Watchdog. “Emergency rate increases must be based on sound actuarial evidence showing that current rates are plainly inadequate. State Farm has provided no such evidence.”
In its closing remarks, Consumer Watchdog emphasizes that State Farm’s arguments focused on financial pressures and market conditions, rather than the actuarial analysis required under California law. The organization’s expert witness, Ben Armstrong, testified that even under the most favorable assumptions to State Farm, the company did not meet the legal threshold for an interim rate.
“California law is clear: insurers must justify their rates before they raise them,” said Pletcher. “This proceeding confirmed that State Farm’s request does not meet the legal standard. Granting this interim rate would set a dangerous precedent, allowing insurers to bypass consumer protections and shift costs onto struggling families.”
Even the Department of Insurance’s Chief Actuary, Tina Shaw, says that raising rates would not solve State Farm’s financial troubles. In her declaration, Shaw stated:
“Increasing Applicant’s homeowners rates is unlikely to be sufficient by itself to effect long-term improvement to Applicant’s financial condition.”
“She is absolutely right,” Pletcher said. “Consumers are being asked to pay more for a solution that even the Department’s expert doesn’t believe will work. That is not a reasonable or just outcome.”
Consumer Watchdog also challenged the fairness of the proposed settlement between the Department and State Farm, citing testimony from State Farm’s expert, Dr. David Appel, who claimed that the interim rate increase poses “no risk to policyholders.” The group criticized this claim as out of touch with the real economic impact on families who will pay an average $40 to $50 per month extra, and much more in areas with higher wildfire risk.
“Dr. Appel evaluated the settlement from State Farm’s perspective alone,” said Pletcher. “But $40 or $50 a month is a serious hardship for California families already struggling to stay afloat.”
The Insurance Commissioner has not yet issued a decision in the case. Further briefing is expected before a final ruling.
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