State Farm General policyholders in California will start seeing a temporary supplemental charge on renewals as the insurer looks to recoup part of its share of the FAIR Plan’s $1 bn wildfire assessment. The fee kicks in Dec. 1.
Homeowners and renters will pay 1.13% of premium for two renewal cycles. Other personal lines climb higher—2.25% for a single renewal.
Commercial property customers get off lighter at 0.26%, also for one cycle. Commercial policies carry the extra charge from January.
The FAIR Plan hit all member companies with the billion-dollar assessment after catastrophic Los Angeles wildfires left the state insurer of last resort struggling.
By February, Commissioner Ricardo Lara said the pool was flirting with insolvency because retained earnings and net reinsurance proceeds couldn’t meet claim and expense obligations.
Members, by rule, must share the cost in proportion to their market share, and they can shift up to 50% of the hit back to policyholders.
State Farm’s burden is heavy. The carrier logged more than 13,000 claims from the January fires, paying $4.2bn already and projecting another $2bn in future payouts.
Regulators had already approved interim rate hikes of 15% to 38% back in June, giving State Farm extra pricing room. The temporary wildfire fee comes on top of those increases.
Several other large insurers made the same move. Farmers Insurance affiliates, Mercury’s California Automobile Insurance Co., Allstate Indemnity, Liberty Insurance, CSAA, Auto Club’s Interinsurance Exchange, and USAA’s property arm all filed requests.
The department gave companies six months to submit filings and promised to review within 60 days of public notice.
The FAIR Plan itself reported more than 5,000 claims tied to the Palisades and Eaton fires in January. Nearly half were total losses. By May, it had already paid $2.7bn.
