California regulators have launched an investigation into State Farm’s handling of thousands of damage claims from policyholders affected by the devastating wildfires that ravaged Los Angeles County in January.
Ricardo Lara, the state’s insurance commissioner, said the inquiry was prompted by a growing number of complaints against the company in the wake of the deadly blazes.
“Californians deserve to return to homes that are truly safe, not forced to handle smoke, soot, and ash on their own,” Lara said in a news release. “Our goal is to close the protection gap and make sure insurance works the way it is supposed to, especially in the face of climate-intensified disasters.”
What Happened?
The catastrophic wildfires that burned through Los Angeles County for days in January covered tens of thousands of acres of land, killed at least 29 people, destroyed thousands of properties and caused billions of dollars in damages.
According to CoStar, the blazes wiped out almost $31 billion in property values, ravaging about 11,000 properties between homes and businesses. More than 95 percent of these real estate losses affected single-family homes.
State Farm, the largest home insurer in the country, said it had received a total of 12,855 claims related to the fires as of June 10 and had already paid more than $3.96 billion in claims. The company has estimated that the January wildfires will cost it a total of $7.6 billion, though reinsurance payments from its parent company would lower the losses to about $612 million.
While State Farm says it is paying claims to policyholders affected by the fires in keeping with its “promise to customers,” several customers have accused the insurer of mishandling, delaying and denying claims in the weeks and months following the blazes, leaving them in precarious financial positions or forced to stay in dangerous homes.
Anger against the company has been boiling over in California since January following reports that the insurer had cut hundreds of policies in areas affected by the fires only months before the blazes broke out.
That anger is mounting as many policyholders feel they are not being treated fairly by the company, which has asked for a 17 percent emergency rate hike to stabilize its financial position in the state after the fires.
What Is the Investigation About?
Lara announced on Wednesday that the California Department of Insurance had initiated a market conduct examination of State Farm, expanding its ongoing investigation into consumer complaints against the insurer. This type of inquiry includes a “thorough, fact-based review” that typically takes several months, the department said.
The commissioner said the department had received numerous complaints from policyholders, with “some troubling patterns” emerging from them, including “the frequent reassignment of multiple adjusters with little continuity in communication, inconsistent management of similar claims, and inadequate record-keeping or information-sharing among claims teams.”
These issues create “unnecessary stress” for policyholders, “prolong recovery, and erode trust,” Lara said. The commissioner added that while the department had launched an investigation, it could take action and advocate for consumers only if it received a formal complaint.
“I urge any wildfire survivor facing delayed payments, claim disputes, multiple adjusters, smoke damage issues, or any other problems to file a formal complaint with my Department,” Lara said.
Complaints can be submitted on the department’s website at insurance.ca.gov, or homeowners can call 800-927-HELP.
State Farm has said it is cooperating with the California Department of Insurance in the market conduct exam process.
What Are People Saying?
Insurance Commissioner Ricardo Lara said in a news release following Wednesday’s announcement: “Californians deserve fair and comprehensive treatment from their insurance companies. No one should be left in uncertainty, forced to fight for what they are owed, or face endless delays that often lead consumers to give up.
“While there are national standards for insurance claims handling, they can be vague and inconsistently applied, especially during large-scale, climate-driven disasters. This examination will assess whether State Farm has complied with California’s consumer protection and claims handling laws and will help determine if further reforms are needed as natural disasters increasingly disrupt insurance markets across the country.”
Assemblymember John Harabedian, a Democrat representing Pasadena, said in a news release: “Following the Eaton Fire, our community deserves clear communication and fair treatment to facilitate a swift rebuilding process. I have received numerous complaints from neighbors regarding the claims process. A market conduct examination will provide the clarity we urgently need. I am grateful to Commissioner Lara for taking action to demand transparency and ensure that families receive the answers they deserve.”
State Farm said in a news release on Thursday: “A fair review will find that thousands of State Farm customers are being helped by our teams on the ground in Los Angeles County and are very satisfied. Our efforts will remain on serving all our customers and meeting our obligations under the contract while providing the necessary information to the CDI. The Department routinely examines all insurance companies. These exams help ensure processes and procedures are in full compliance with state regulations.”
What Will Happen Next?
The investigation launched by California regulators on Wednesday is expected to take months. Meanwhile, California homeowners who have insurance policies with State Farm are likely to face a rate increase this year as the carrier’s request for a 17 percent hike received interim approval by the California insurance commissioner last month.
The rate changes are expected to affect homeowners renewing their policies on or after June 1, 2025.
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