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If you’re a driver in California using State Farm for your vehicle coverage, your auto insurance is about to get a lot more expensive. No, State Farm isn’t hiking rates for owners of Hyundai and Kia models, rather raising rates from their pandemic lows, the Los Angeles Times reports.
Insurance rates fell during the thick of COVID-19 pandemic, thanks to city and state shelter in place rules that leaving most streets empty of cars. But, as you know, insurance companies are in the business to make money. And as everyone else is getting back on the road, it makes sense that like other insurance companies, State Farm would follow suit and raise its rates again.
The home and auto insurance company is waiting for California Insurance Commissioner Ricardo Lara to approve the $264 million increase. Lara so far has collectively approved $1 billion in insurance rate hikes for the state’s top six insurance companies. If State Farm gets the okay, 3.7 million drivers will see an average annual increase of 6.9 percent, or $71 per policy, according to Consumer Watchdog.
In order to get that increase, by state law, State Farm will have to justify why the increase is necessary. It may argue that the hikes are to make up for the massive underwriting defecit State Farm experienced in 2022 — a whopping $13.4 billion loss on $45.7 billion in premiums. So sure, the insurance company would increase rates to make up for that loss.
However, Consumer Watchdog argues that the increases are fueled by plain greed. Carmen Balber, executive director of Consumer Watchdog says that the increases are being signed off by the insurance commissioner.
“The department just rolled out, and rushed out, increases in each of these cases without full justification of any of them,” Balber said.
A spokesperson for State Farm told the LA Times that the rate increases are simply a result of more drivers returning to the road.
“As more people are on the roads, we’re seeing an increase in claims. Auto claim costs are being compounded by record inflation and supply chain disruptions. All of this has increased the cost of labor and materials, which translates to higher auto repair costs.”
Add the cherry to the top of this bad news for drivers cake, Consumer Watchdog says the rate increases are happening even though State Farm and other insurance companies “have failed to pay their customers for windfall overcharges during the pandemic lockdown, when people dramatically reduced their driving and accidents and insurance claims dropped.”
A spokesperson for the insurance commissioner claims the agency is ensuring that consumers don’t pay more than is necessary for their coverage.
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