Homeowners Insurance Legal Challenge Seeks To Stop State Farm Rate Hikes

A California homeowners insurance legal challenge seeks to stop any proposed rate increases by State Farm. The homeowners insurance legal challenge, filed by the group Consumer Watchdog, claims that State Farm should cut their rates by double digits. The suit comes as a challenge to the company’s proposal to raise its homeowners insurance rates by nearly seven percent in the next year. The company has claimed that it is undergoing “financial hardship”, despite having reaped record-setting profits.

Details of the Homeowners Insurance Legal Challenge

Lawyers for the consumer advocacy group brought the homeowners insurance legal challenge to the California Department of Insurance. The challenge seeks to prevent State Farm from gaining more than $200 million in revenues from excessive premium payments. The group also seeks to have State Farm refund millions of dollars in overpriced premium payments to policy holders. Attorneys for State Farm claim that the homeowners insurance legal challenge would deny the company its constitutional rights.

Homeowners Insurance Legal Challenge Highlights Record Profits

State Farm serves as California’s largest provider of homeowners insurance. Data from State Farm’s annual financial statements shows that the company’s position in the state has netted the company more than $1.5 billion in profits since 2010. State Farm’s response to the homeowners insurance legal challenge has been to cite a “financial hardship” exemption in the state’s insurance laws. If the homeowners insurance legal challenge favors State Farm, the company could increase its annual premiums by 6.9 percent, earning and additional $210 million in revenues.

Homeowners Insurance Legal Challenge and Proposition 103

The homeowners insurance legal challenge revolves around language in Proposition 103, which California voters passed in 1988. The proposition requires insurers to submit proposals for insurance rates to the state’s insurance department. The law contains rules that limit the profits insurers can make. Attorneys for State Farm seek to carve out exemptions to these rules during the homeowners insurance legal challenge. The law also allows for “consumer participation in the administrative process for setting insurance rates,” such as the Consumer Watchdog action.

Homeowners Insurance Legal Challenge Shows State Farm’s History

Over the last ten years, State Farm has been targeted by at least three homeowners insurance legal challenges regarding their rate increases. A 2006 investigation from the state’s Department of Insurance called on State Farm to roll back its overall rates by 20 percent. A homeowners insurance legal challenge from Consumer Watchdog in 2011 forced the company to roll back its rates by 12.6 percent. Two years later, the state forced the company to cut its rates by 1.2 percent. According to Consumer Watchdog, these actions saved California policy holders over $500 million.

Sources: PR Newswire, California Department of Insurance

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NOTE: This blog post is a news story and does not imply an endorsement of Arguello Law Firm by any of the parties mentioned herein.