Consumer Watchdog: "State Farm's Emergency Rate Hike is Not Justified"
Consumer group urges regulators to reject rate hike as unsupported and unfair
LOS ANGELES, April 8, 2025 -- In the first day of hearings, Consumer Watchdog made its case before Administrative Law Judge Karl-Fredric Seligman that California regulators should deny State Farm's request for an emergency increase in homeowners insurance premiums, saying the company hasn't provided evidence to justify charging consumers more. The company on Friday proposed reducing its requested rate hike for homeowners from 22% to 17%, with more support from the parent company, but Consumer Watchdog said those changes still do not justify the rate hike.
"State Farm is trying to push through a rate increase without following the rules," said William Pletcher, Consumer Watchdog's lead attorney at today's Department of Insurance hearing. "The company hasn't made the case required under the law – their proposal isn't even consistent – first they wanted 22%, now they want 17%. We're glad the amount went down, but it still needs to be justified, and State Farm has not."
Copies of documents filed in the case can be found here, including Consumer Watchdog's objections, and here, and the declarations of Consumer Watchdog's actuary here, and here.
State Farm Expert Disqualified For Conflict of Interest, Also Working for Department of Insurance
Administrative Law Judge Seligman ruled that State Farm's expert Nancy Watkins could not testify on behalf of State Farm's rate request because she is also working as an expert consultant for the California Department of Insurance. The Judge left open the possibility that he would revisit that decision later in the hearing. Watkins' contract, obtained from a Public Records Act request, shows she was charged with drafting regulations to allow insurance companies to pass on reinsurance costs to consumers and responding to public comments about the regulations. Consumer Watchdog criticized the conflict of interest at the time, noting Watkins's work as an industry expert.
Public Pressure Reduces Rate Request
An April 4 supplemental stipulation by State Farm and Department of Insurance staff proposed a reduced interim rate for homeowners of 17%, and included a promised $400 million capital contribution from State Farm's parent company and general commitments related to nonrenewal practices.
Consumer Watchdog argued the stipulation is flawed because it failed to comply with the court's orders and regulations: it was not jointly submitted, it lacked supporting declarations, and it was filed after the deadline for public review. Still, the concessions in that filing reflected the impact of Consumer Watchdog's legal and public opposition.
"They didn't follow the law, but they lowered the rate and added a capital infusion because they had to respond to the pressure," said Pletcher. "It shows the impact of public participation under Proposition 103 in reviewing rates and protecting consumers—even when insurers won't follow the rules."
No Justification, No Emergency
State Farm says it needs the hike because of financial pressure. But according to Consumer Watchdog's actuary, Benjamin Armstrong, the company's current rates are well within legal limits—even using State Farm's own data.
"There's no urgent need that meets the legal threshold for an 'emergency' rate hike," Pletcher said.
A Broken Process
Consumer Watchdog also criticized State Farm for missing deadlines and failing to turn over key information: "There's a process designed to protect the public from unjustified rate hikes," said Pletcher. "It wasn't followed. Filings came in very late, in violation of the court's orders. And this hurts the ability of the public to review, to analyze, and to respond to rate hikes."
Why Financial Condition Doesn't Belong in Rate Setting
Consumer Watchdog also argues that California law is clear: insurers can't raise rates just to improve their financial profile. Rates must reflect actual risk and costs—not an effort to restore profits or maintain credit ratings. Policyholders aren't shareholders. They pay for protection for their own risks, not to subsidize an insurance company's balance sheet.
What the Data Really Shows
Armstrong is the only expert in the case who ran a full rate analysis using California's official rate-setting formula. He found that, based on the law, State Farm's current homeowners rates are not too low.
Consumer Watchdog argues State Farm has failed to provide the minimum data required by law to show the need for an increase – including basic information on how much it has paid in claims, and that State Farm is improperly leveraging the financial impact of the L.A. fires.
Consumer Watchdog also pointed out that State Farm sent $3 billion in reinsurance payments to its parent company over the past decade—without any significant recovery for California policyholders until this year.
"This isn't about fair pricing. It's about padding their corporate balance sheet," said Pletcher.
Refunds Are Not a Solution
State Farm says it will offer refunds if its rate increase is later overturned. But Consumer Watchdog says that's not how the law works—and not how fairness works.
"You can't overcharge now and promise to fix it later," Pletcher said. "Especially when families are still recovering from disasters like the January wildfires."
What's Next
The emergency hearing continues this week. A full evidentiary hearing is scheduled for June 1.
"Californians deserve transparency and accountability in rate-setting," Pletcher said. "The record doesn't support this rate hike. And it shouldn't move forward."
SOURCE Consumer Watchdog