Stepping up to help consumers and answers their questions about the California Homeowners insurance market, Karl Susman rolls up his sleeves and dives right in!

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State Farm recently won approval for a 17% rate increase and are hoping to boost it to 30%.

"Inside the Issues" host Amrit Singh speaks with insurance agent and industry expert Karl Susman about State Farm's emergency rate hike increase and the latest on the state's insurance crisis.

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California's insurer of last resort is facing a financial nightmare. The President of the California FAIR Plan updated lawmakers with the Assembly Insurance Committee on their finances and says the plan is running out of money as claims add up.

"At our previous oversight hearing, it was relayed that the FAIR Plan may be one catastrophe away from seeking apcproval to assess their member companies. Unfortunately, that catastrophe took place on January 7," said Asm. Lisa Calderon (D-Whittier).

The FAIR Plan's President, Veronica Roach, says they've received 5,542 claims as of May 22 for damages caused by the Palisades and Eaton Fires, with half of those claims reporting total losses.

"We've paid over $2.9 billion in claims so far. Our estimate is that we're going to pay close to $4 billion total when all is said and done," said Roach.

Insurance expert, Karl Susman, said it's no secret the FAIR Plan is running out of money. Here's what he wants homeowners to know.

"They may very well go back to the private companies that are already paying their own claims for the fire and have to contribute more money to keep FAIR Plan propped up," said Susman.

To make matters worse, the FAIR Plan has seen an increase in insuring homes in low wildfire hazard areas.

"In the low wildfire risk area, we've grown about 40% in exposure so far in the first six months of the year," said Roach.

Roach adds that the lack of options for homeowners insurance is one of the main reasons but so is the cost.

"We are lower priced. Somebody just sent us an example last month where the policy with us, it was about $682, I think, was the premium," said Roach.

Susman said this is misleading because the FAIR Plan is only basic fire insurance.

"What she's comparing it to is not a standard insurance company because they're not offering coverage," said Susman.

Moving through the legislature right now is AB 226, if passed, it would allow the FAIR Plan to request bonds from the California Infrastructure and Economic Development Bank if it faces financial challenges during a major event like a wildfire. The FAIR Plan said it is in support of this bill.

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A court ruling on Tuesday clears the way for State Farm Insurance to move forward with significant rate increases for homeowners and renters. Homeowners would see an average 17% hike, while renters and condo owners would see prices increase an average of 15%. We spoke to industry expert Karl Susman for his analysis on the situation.

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Millions of State Farm Insurance customers in California will soon experience substantial rate hikes following an emergency increase approved by the state's Insurance Commissioner. The decision, which affects homeowners, renters and rental property owners, comes in response to State Farm's request for financial stabilization.

The approved increases include an average 17% rise for homeowners, 15% for renters and condo owners, and a dramatic 38% spike for rental property owners. These rate hikes are set to take effect on June 1, 2025.

"What this boils down to is, higher risk, higher exposure, means higher premiums," said Karl Susman, an independent insurance agency owner based in Los Angeles.

The rate increases vary based on location and risk factors.

"You might see someone who is nowhere near the brush who has a home, their rate might go up 5%, but somebody who is closer to the hills or in an area that is very high-risk for wildfires might see it go up 25%," Susman explained.

State Farm's request for an emergency rate increase came in the wake of January wildfires in Los Angeles. The company initially sought a 22% increase for homeowners, but later revised to 17%.

An administrative law judge ruled in favor of State Farm's request, describing it as "a rescue mission to stabilize State Farm's financial condition while safeguarding policyholders." California's Insurance Commissioner subsequently backed this ruling.

In exchange for the interim approval, State Farm's parent company has agreed to provide a $400 million cash infusion to the insurance provider. Additionally, State Farm has committed not to drop existing customers through the end of 2025.

A full hearing is expected in October, where State Farm must justify the need for the rate increase.

"If State Farm fails to demonstrate that need, then they had to agree that they will refund that money they've charged, that additional premium, plus interest to all of their affected policyholders," Susman said.

However, Consumer Watchdog, an organization challenging the rate increase, has criticized the Insurance Commissioner's decision. The group argues that "refunds will be too little, too late for homeowners who are already struggling to pay their home insurance premiums."

Customers will see the new rates take effect when their current policies are up for renewal.

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State Farm, California’s largest home insurer, has received emergency approval to increase insurance rates starting June 1, following a judge’s recommendation and a conditional greenlight from Insurance Commissioner Ricardo Lara. This marks the first time an insurer in the state has been granted such approval on an emergency interim basis.

State Farm requested the hikes earlier this year, citing financial distress and over $7 billion in expected claims from the January Los Angeles County wildfires. The Department of Insurance initially recommended approval, but Commissioner Lara sought additional financial information and asked whether the company could receive help from its parent, State Farm Mutual.

Ultimately, Administrative Law Judge Karl-Fredric Seligman ruled in favor of the hikes after a public hearing, describing them as “a fundamentally fair, adequate, and necessary measure” to stabilize the company. Commissioner Lara adopted the ruling, allowing the company to raise:

* Homeowners insurance by 17%
* Renters and condo policies by 15%
* Rental dwelling coverage by 38%

Lara stated the rate hikes are a necessary step to protect both policyholders and the broader insurance market, though he noted the company must still fully justify the increases in a formal rate hearing later this year.

**Consumer Pushback**

Consumer advocacy group Consumer Watchdog criticized the decision, claiming it violates Proposition 103, which requires insurers to prove rate hikes are justified before implementation. Executive Director Carmen Balber called it a "great disappointment for consumers."

Concerns have also been raised about State Farm’s handling of fire-related claims. Survivors and lawmakers have accused the company of delays and denials. Commissioner Lara emphasized that the rate decision is separate from those complaints, although he pledged to ensure that claims are handled fairly and did not rule out a formal investigation.

Joy Chen of the Eaton Fire Survivors Network warned the move sets a troubling precedent, signaling to consumers that they may not be supported when disaster strikes despite paying premiums.

**State Farm's Response**

State Farm spokesperson Sevag Sarkissian defended the company’s efforts, noting they deployed the largest claims team in the industry. CEO Dan Krause said less than 3% of the 10,000+ fire-related claims have received complaints. He also responded to Lara’s inquiry about increasing contents coverage, declining a boost from 65% to 75% without requiring itemized inventories.

As part of the emergency approval, State Farm agreed to:

* Secure a $400 million surplus loan from its parent company
* Stop canceling homeowner policies through the end of 2025
* Refund customers if final approved rates are lower than interim rates

A full rate hearing, initially expected in June, may be postponed until October to give all parties time to prepare. Judge Seligman stressed that such hearings are vital to ensure emergency rate hike requests are subjected to rigorous evaluation.

Despite the controversy, both the Insurance Department and State Farm argue that allowing the rate hikes helps prevent further financial instability and ensures insurance availability for over a million homeowners in the state.

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Insurance expert Karl Susman discusses the recently approved rate increase and the company’s argument that it's needed in order to do business in California.

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