State Farm Denied Homeowners Rate Hike

State Insurance Commissioner John Garamendi has denied a request by State Farm Insurance Cos. for a rate increase on its homeowners and manufactured-home policies in California.

The announcement came just 15 days after State Farm raised its estimate of losses from January’s Northridge earthquake by 26%, to $2.53 billion. The insurer expects that to be the final tally.

In refusing the rate increases, the state said the hikes would have resulted in “excess profits” for the company, which it noted was decreasing its homeowners insurance exposure in California.

The state’s decision also rejected an administrative law judge’s proposed approval of State Farm rate increases of 5.7% for homeowners insurance and 17.3% for manufactured-home coverage, the commissioner’s office said.

Officials at Bloomington, Ill.-based State Farm--the largest U.S. home and auto insurer--said they were not surprised by the decision, but they charged that it may have been politically motivated.

“It appears to be another political decision for (Garamendi) to decide we don’t warrant an increase in our homeowners rates by ignoring the findings of his own administrative law judge,” said Bill Sirola, a company spokesman.

Sirola also disputed the commissioner’s claim that State Farm is decreasing its exposure in California. He said State Farm’s homeowners policies in the state are up 11% from last year.

California accounts for 12% of State Farm’s homeowners insurance business.

The insurer is looking at ways it can appeal the decision, Sirola said.

State Farm had requested an 8.3% increase in homeowners insurance rates in California and a 17.3% increase in manufactured-home rates.

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