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State Farm Policies Impact Californians
21
Nov

The Reinsurance Debate: How State Farm’s Policies Impact Californians

November 21, 2024,

State Farm Policies Impact Californians

State Farm Policies Impact Californians

State Farm, California’s largest home insurer, is requesting a 30% rate increase on homeowners insurance. The company cites wildfire risks and rising reconstruction costs as reasons for the hike. However, advocacy group Consumer Watchdog has raised concerns about the fairness of these rates.

Why is Consumer Watchdog criticizing State Farm?

Consumer Watchdog alleges that State Farm has been overpaying for reinsurance from its parent company, State Farm Mutual, while recovering little in return. According to Yahoo Finance, State Farm spent $2.2 billion on reinsurance from 2014 to 2023 but recovered less than 20% of that cost. Carmen Balber, executive director of the group, stated:

“Reinsurance is a main reason State Farm is asking for its massive 30% rate hike — but the company is overpaying for reinsurance, and consumers shouldn’t foot the bill” (Yahoo Finance, 2024).

How are Californians affected?

The proposed hike comes at a challenging time for California homeowners. State Farm has already raised rates by 20% earlier this year and announced it will not renew 72,000 policies. These changes coincide with similar moves from other major insurers, like Farmers and Allstate, who are raising premiums or withdrawing from California due to escalating wildfire risks and claims costs.

California Insurance Commissioner Ricardo Lara has introduced reforms to stabilize the state’s insurance market. However, Consumer Watchdog strongly opposes a new regulation allowing insurers to pass reinsurance costs directly to policyholders. They argue that State Farm’s practices are “Exhibit A” for why this rule could lead to unfair pricing for consumers.

What does this mean for California homeowners?

The Department of Insurance is reviewing State Farm’s rate hike request and demanding more transparency about its reinsurance agreements and financial health. The decision could have major implications for policyholders already struggling with high premiums and limited options.

Source: Yahoo Finance, State Farm Accused of Funneling Excess Reinsurance Costs to Parent Company, 2024. Read the full article here.

citizens property insurance
21
Nov

Florida’s Citizens Property Insurance Crisis

November 21, 2024,

Citizens Property Insurance Under Fire after Hurricane Debby

On August 5, 2024, Hurricane Debby made landfall in Florida, bringing 99 mph winds, a 6-foot storm surge, and dozens of tornadoes. The storm caused extensive flooding and wind damage, leaving thousands of homes and businesses demolished and tragically resulting in eight fatalities.

Why are claims being denied?

Citizens Property Insurance, Florida’s largest insurer with over 1.2 million policies, denied 77% of claims related to Hurricane Debby. According to Newsweek, Citizens spokesperson Michael Peltier explained:

“That area received minimal wind damage but significant flood/surge damage. Since surge and flood are excluded, most of the claims have been denied or closed with no payment” (Newsweek, 2024).

Flood damage, not covered under standard property insurance, forces many homeowners without flood insurance to rely on FEMA grants for financial support.

How does this impact Florida homeowners?

The effects of Hurricane Debby highlight ongoing challenges in Florida’s insurance market. While Citizens is designed as a “last-resort” insurer, its high denial rates leave many policyholders struggling with repair costs. U.S. Senator Sheldon Whitehouse has raised concerns about the company’s financial stability, warning:

“Citizens is potentially one catastrophic storm or storm season away from losses that exceed its immediate ability to pay by billions” (Newsweek, 2024).

Floridians face rising premiums, limited coverage options, and uncertainty about their insurance claims. The state’s insurance crisis underscores the importance of understanding policy limitations and exploring flood insurance as an additional safeguard.

Source: Newsweek, Florida’s Largest Insurer Denies Hurricane Debby Claims, 2024. Read the full article here.

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