CALIFORNIA FOCUS
FOR RELEASE: TUESDAY, APRIL 8, 2025 OR THEREAFTER
BY THOMAS D. ELIAS
“EVERYONE ELSE ABOUT TO START SUBSIDIZING MANSION PAYOUTS”
Here’s the likely
outcome of the April 8 hearing set to follow the California insurance
commissioner’s tentative mid-March approval of a 22 percent average rate
increase for customers of State Farm General Insurance Co., this state’s
largest carrier of home insurance policies:
All other
Californians will soon be subsidizing the rebuilding of myriad mansions burned
down in the January firestorm that ravaged much of Los Angeles County. Plus a
good number of less luxurious homes, too.
Commissioner
Ricardo Lara tentatively approved the average 22 percent rate hike for State
Farm customers, with similar increases sure to come also for customers of other
insurance companies like Mercury, Safeco, Travelers, Allstate and more.
These increases
will hit virtually everyone: They include a 38 percent hike for rental
properties, with a 15 percent raise for renters’ insurance on contents and for
condominium owners.
The hearing will
see opposition from several consumer groups, most prominently the Consumer
Watchdog advocacy group. The eventual outcome may end with some increases
dropping a percentage point or two. As it stands, what Lara tentatively
approved amounts to an average of about $600 per year for every policyholder in
the state.
Make no mistake,
this is a pure subsidy for State Farm and the folks it insures. Perhaps the
archetype claim from the January fires was for a destroyed home on two
contiguous ocean-front lots in Malibu that sold three years ago for $85
million.
Trying to put up
a show of looking after customers’ interests, Lara said he will expect State
Farm to stop canceling homeowner policies, a practice that led to intense
distress for some victims of the latest crop of large wildfires because many
were forced after cancellations to turn to the state’s expensive and not very
comprehensive last-resort insurer, the California Fair Plan.
Lara also said he
will expect State Farm General’s parent company, Illinois-based State Farm
Mutual, to contribute hundreds of millions, perhaps as much as $500 million,
from reserves long held by the parent company. That would be a tiny fraction of
the company’s actual reserves, which in January stood at a minimum of $134
billion, with some estimates as high as $192 billion.
So people who
live in areas that have never seen a wildfire and are not likely ever to
experience one will soon contribute to payouts for owners of large homes in
Malibu and Pacific Palisades.
What’s more,
State Farm and other insurance companies stand to get much of their money back
via the current spate of lawsuits blaming Southern California Edison Co.
transmission lines for sparking the Eaton fire that incinerated much of
Altadena, about 40 miles east of Pacific Palisades. Once insurance companies
pay their policyholders off in that area, they will inherit any customer claims
against the big utility.
Then there’s
re-insurance, routinely bought by insurance companies to insure themselves
against big losses. That will cover more billions of dollars for them.
None of that will
much mitigate what Lara likely will allow the insurance companies to add to
customer premiums starting in May. These other factors making life easier for
the insurance industry have played little or no role in price increases
assessed after previous wildfires hit other parts of California through the
last eight years.
Meanwhile, the
closest customers have heard to the truth about all this came from a
since-fired State Farm executive who was secretly recorded saying his company
uses policy cancellations as a ploy to drive prices up in California and other
disaster-prone states.
Haden
Kirkpatrick, until recently State Farm’s vice president for innovation and
venture capital, was fired immediately after he became the first completely
truthful insurance executive this nation had seen in decades.
But Lara showed
no sign of paying the slightest heed to anything Kirkpatrick admitted. Which
should come as no surprise from a state official who promised never to accept
campaign donations from the companies he regulates and then took large sums,
only to be shamed into returning the money later.
The entire
exercise is shameful and demonstrates why, when Lara leaves office after next
year, his replacement must be far more consumer friendly.
-30-
Email
Thomas Elias at tdelias@aol.com. His book, "The Burzynski Breakthrough,
The Most Promising Cancer Treatment and the Government’s Campaign to Squelch
It," is now available in a soft cover fourth edition. For more Elias
columns, visit www.californiafocus.net
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