News
State Farm wins first-ever emergency rate hike in California - CalMatters
State Farm can raise homeowner and other rates starting next month, becoming the first insurance company to win approval to do so on an emergency interim basis in California.
The state’s largest insurer made the unprecedented request for emergency rate hikes earlier this year, after it said it was in financial distress and expected more than $7 billion in claims because of the Los Angeles County fires in January.
The state Insurance Department staff recommended approval of the company’s request, but Insurance Commissioner Ricardo Lara asked the company for more information about its finances. He also asked whether the insurer could turn to its parent company, State Farm Mutual, for help. Lara then conditionally approved but punted the official decision to a judge, who oversaw a three-day public hearing last month to consider the proposed agreement between the department and the insurer.
“Taken as a whole, it represents a fundamentally fair, adequate, and necessary measure — effectively functioning as a rescue mission to stabilize State Farm’s financial condition while safeguarding policyholders,” wrote Karl-Fredric Seligman, the administrative law judge, in a 38-page decision released today.
Lara, who as commissioner has the last word, adopted the ruling today. The decision means State Farm can raise its rates an average 17% for homeowners, 15% for renters and condominiums and 38% for rental dwellings starting June 1.
“I am balancing all the facts,” Lara said in a statement. “Protecting all State Farm customers and the integrity of our insurance market is an urgent matter.”
Proposed Decision Approving $749 Million State Farm Home Insurance Rate Hike Goes to Insurance Commissioner Lara, Says Consumer Watchdog
"Today's decision that would make consumers pay now but allow State Farm to wait months before having to show its math is a great disappointment for consumers. Voter-approved Proposition 103 says a rate hike shouldn't come before the rate justification, but that's what happened here. We urge the Commissioner to reject the proposed decision so State Farm policyholders, many of whom are struggling to get their claims paid by the company after the Los Angeles fires, aren't overcharged," said Carmen Balber, executive director of Consumer Watchdog.
Recent serious allegations have emerged regarding State Farm's mishandling of fire claims following the Eaton and Palisades fires in Los Angeles. Numerous policyholders have reported delays, denials, rotating adjusters, and inadequate assessments of damage, leading to financial hardship and widespread criticism of the insurer's claim handling practices. "It adds insult to injury for consumers to be forced to pay significantly more for coverage when some of these same consumers may be simultaneously trying to recover from the fires while State Farm is mishandling their existing claims," said Balber.
Under the proposed decision, State Farm's rate hike will be subject to review in a full rate hearing, where the company will be required to fully justify the rate. That hearing is now tentatively scheduled for October.
The agreement also promises refunds if the rate is ultimately proved to be excessive. "Refunds will be too little too late for homeowners who are already struggling to pay their home insurance premiums," said Balber. "Nevertheless, we will fully defend consumers' right to fair rates in the upcoming hearings where State Farm will finally have to justify what they want to charge."
S&P downgrades State Farm General Insurance credit ratings on weak underwriting & wildfire impact - Reinsurance News
S&P Global Ratings has lowered State Farm General Insurance’s (SFGI) financial strength and issuer credit ratings to ‘A+’ from ‘AA’, citing a significant deterioration in the company’s capital regulatory solvency ratios.
The ratings remain on CreditWatch with negative implications. CreditWatch is S&P’s system used to indicate that a company’s credit rating may be at risk of changing in the near future .
S&P took this credit action in response to SFGI’s weak underwriting performance over the past five years, which has led to a significant deterioration of its capital position and regulatory solvency ratios.
According to the rating agency, this was largely from the recent California wildfires and led to capital deteriorating near the regulatory authorized control level (ACL).
In its statement, S&P highlighted that the State Farm group has not provided any capital support to SFGI beyond reinsurance agreements during this period of underperformance.
The agency stated: “SFGI is an operating subsidiary of State Farm Mutual Automobile Insurance Co. (AA/Stable/–) that does business almost exclusively in California, with 75% of SFGI’s total $4.0 billion in 2024 direct premiums written from the homeowners business.
“SFGI’s ability to achieve rate adequacy is limited because of regulatory restrictions in California on personal lines. SFGI has been vigilant in taking non-rate actions to manage exposure, particularly to wildfires, but it hasn’t been enough to offset the elevated severity and frequency affecting the book.”
Three insurers spent more on brokers than they earned in premiums
Rising commission and brokerage costs are squeezing insurers, and in some cases, swallowing more than 100% of earned premiums
As commission and brokerage expenses continue their steady climb, new data shows some insurers are struggling to maintain sustainable underwriting economics – with sales expenses outpacing premium income by wide margins.
In 2024, US property and casualty (P&C) insurers spent a collective $93.8 billion on commission and brokerage costs, or 11.6% of all direct premiums written, according to the latest IB+ dashboard. That figure marks a 5.5% increase over the previous year, continuing an upward trend that could pose challenges for insurers with high broker dependence or aggressive customer acquisition strategies.
While most firms managed to keep distribution expenses in check, a handful of outliers spent far more on commissions than they earned in premiums, suggesting deeper pricing, structural, or strategic issues.
Farmers Mutual Protection Association Group
Leading the pack by a significant margin, Farmers Mutual Protection Association Group reported a commission and brokerage expense ratio of 204% in 2024. That means the company spent over 15 times more on broker-related costs than it collected in direct premiums.
The insurer recorded $102 million in direct premiums written last year but paid out $208 million in broker and agent commissions. This marks a sharp departure from prior years, during which the ratio hovered at a much more sustainable 13%.
Such a steep increase could point to pricing miscalculations, an underestimation of distribution costs, or even broader financial distress. A heavy reliance on brokers or legacy commission structures may also be weighing on the firm’s balance sheet. MORE
Research
2025 U.S. Insurance Digital Experience Study | J.D. Power
Nationwide Ranks Highest in Service; Amica, Erie Insurance Rank Highest in a Tie in Shopping
More than half (57%) of auto insurance customers have actively shopped for a new policy in the past year, the highest shopping rate ever recorded by J.D. Power, and that’s putting more pressure than ever on digital channels, which have become the primary tool through which customers purchase insurance.
According to the J.D. Power 2025 U.S. Insurance Digital Experience Study released today, 47% of auto insurance shoppers now purchase their policies through digital channels, but the experiences they are having on those websites and apps is notably uneven from one insurer to the next.
“The primary communications conduit customers now have with their auto insurer is a website or an app, so that’s really ramped up pressure on insurers to put their best foot forward on digital properties,” said Eric McCready, director of digital solutions at J.D. Power. “Some insurers are doing this much better than others. Particularly in quoting new policies and comparing prices and coverages, the data shows a stark divide between top and bottom performers, which could have serious effects on new business growth during this period of heightened shopping activity.”
The U.S. Insurance Digital Experience Study evaluates the digital consumer experiences of both property and casualty (P&C) insurance shoppers seeking quotes and existing customers conducting typical policy-servicing activities. It also examines the functional aspects of the service and shopping experiences. Service experience examination includes desktop web, mobile web and app in four factors: design; information; tools/capabilities; and system performance. Shopping experience examination includes desktop and mobile web in four factors: design; information; quoting; and system performance. The study was conducted in collaboration with Corporate Insight, the leading provider of competitive intelligence and user experience research to the financial services and healthcare industries.
Auto and Property Insurance Shopping in First Quarter 2025 Elevated Compared to One Year Ago
Auto insurance shopping in Q1 2025 increased 10% compared to the same period in 2024. Home insurance shopping was up 5% year over year, according to TransUnion (NYSE: TRU) research.
While the trend of elevated shopping levels has been consistent for some time, a key difference emerged over the last quarter for auto insurance. Higher-risk consumers are once again the most active shoppers for the first time since Q4 2021. Insurers may have returned to traditional practices of focusing rate increases on higher risk segments, rather than across the board.
As a result, higher-risk customers are still shopping for lower rates, while mid- and low-risk customers may have seen their rates stabilize. These findings and more are included in TransUnion’s latest quarterly Insurance Personal Lines Trends and Perspectives Report.
“As rates have settled for the majority of auto insurance customers, we are experiencing a return to historical insurance shopping patterns, which correlate price sensitivity closely to relative insurance risk,” said Patrick Foy, senior director of strategic planning for TransUnion’s Insurance business. “However, uncertainty in the cost and availability of parts for vehicle and home repairs, could eventually lead to a return of broad-based price increases, and weather-related catastrophes—while still unpredictable—have also become a far more common and costly phenomenon.”
The report notes that natural disasters have increased substantially, with 27 observed $1 billion dollar-plus disasters in 2024. This is more than double the 2010-2019 average of 13 disasters per year. The overall 2024 total cost was around $183 billion—also more than double the average annual cost in the 2010s.1
Climate/Resilience/Sustainability
NOAA will no longer track climate change-fueled weather disasters
[Editor's Note: NOAA's Billion Dollar Disaster tracker has been one of the most popular and referenced reports by insurance ecosystem players and pundits alike. Most often used to make a point and historic contrast perspective. Aside from climate change disagreements, the at-a-glance graphic will be missed. Perhaps this will open the door for others, including non-governmental thought leaders to step in]
NOAA will no longer track climate change-fueled weather disasters
The National Oceanic and Atmospheric Administration (NOAA) has announced it will stop tracking the costs of climate change-driven weather disasters, such as floods, heat waves, and wildfires. This decision is the latest in a series of changes under the Trump administration aimed at limiting federal resources dedicated to addressing climate change.
NOAA, an agency under the U.S. Department of Commerce, is responsible for daily weather forecasts, severe storm warnings, and climate monitoring. It also oversees the National Weather Service.
The agency confirmed that its National Centers for Environmental Information would no longer update its Billion-Dollar Weather and Climate Disasters database beyond 2024, and that the data, which goes back as far as 1980, would be archived. For decades, this database has tracked hundreds of major weather events across the United States, including hurricanes, hailstorms, droughts, and freezes, which have caused trillions of dollars in damage.
This database uniquely sources data from the Federal Emergency Management Agency (FEMA), insurance organizations, state agencies, and more to estimate the overall losses from individual disasters.
In February the administration dismissed hundreds of probationary NOAA employees Kim Doster, NOAA Communications Director, explained in a statement that the decision was “in alignment with evolving priorities, statutory mandates, and staffing changes,” reports AP.
Hawaii resolution calls on insurers to force climate accountability
Not only has the climate been destabilized, but so has much of the property and casualty insurance industry.
Hawaii experienced a major climate-related disaster in August 2023, when high winds and dry weather fed wildfires that swept across the island of Maui.
Lawmakers in Hawaii have passed a resolution encouraging insurance companies and the Hawaii Property Insurance Association to reduce insurance costs for local residents by filing subrogation claims against the fossil fuel industry. The resolution states that rising sea and air temperatures from climate change are worsening weather events and destabilizing the state’s climate.
The resolution reads in part: “Overwhelming evidence demonstrates that certain responsible polluters in the fossil fuel industry have been aware of their contribution to climate change for decades, and have knowingly engaged in misleading and deceptive practices regarding the connection between their products and climate change, exacerbating climate-related harms.”
Not only has the climate been destabilized, but so has much of the property and casualty insurance industry. This has led to premium increases for customers as well as a bump in nonrenewal rates.
“Insurers and injured parties have previously pursued claims against responsible parties related to the opioid epidemic, big tobacco, and other major parties responsible for widespread damages affecting insurance premiums to ensure that the burden of financial loss does not fall solely on policyholders and taxpayers,” the resolution continues.
AI in Insurance
Where are insurance leaders getting real results with AI?
In 15 years, AI may handle the majority of straightforward underwriting, service and claims tasks, resulting in a more tech-augmented, streamlined workforce.
With AI quickly becoming a fixture in the insurance industry, carriers are scrambling to better understand the technology and adapt it to their business models.
The global AI in insurance market is experiencing substantial growth and projected to reach $10.27 billion in 2025, attributed to data explosion, risk assessment and underwriting, fraud detection and prevention, customer experience enhancement, operational efficiency and cost reduction.
Joe Khoury is a managing director and partner on the insurance practice at Boston Consulting Group. PropertyCasualty360.com recently spoke with Khoury about AI’s adoption into the insurance sector and how it might change the industry in five, 10 and 15 years.
PropertyCasualty360.com: How is AI reimagining underwriting? What can insurance carriers do with the gains in efficiency? Pass on to customers?
Khoury: AI is reimagining underwriting by enabling the integration of unstructured data—such as customer behavior, third-party sources, and digital interactions—into real-time risk assessments. It significantly improves efficiency, with gains of up to 36% in complex lines, and can reduce loss ratios by as much as three percentage points. These improvements allow underwriters to shift from routine assessments to strategic and judgment-based work.
AI also brings greater consistency and transparency to underwriting decisions by reducing subjective bias and relying on data-driven models—especially valuable for complex or emerging risks like cyber and climate. Insurers can leverage these capabilities to shift from reactive to proactive risk selection, identifying and pricing risks earlier in the customer journey—sometimes even before a formal quote is requested.
The resulting efficiencies can be reinvested to offer more competitive pricing, develop personalized products, enhance digital experiences, or increase profitability. Ultimately, this can be passed on to customers through faster service, better coverage, and reduced premiums.
Telematics, Driving & Insurance
Driver-Centric Telematics Services Could be Secret Weapon
New data from Escalent’s Fleet Advisory Hub™ underscore driver influence in commercial vehicle telematics programs, offering new path to differentiation...The number of connected vehicles on the road is projected to more than double over the next three years. However, while the commercial vehicle telematics market is poised for strong topline growth, the commoditized nature of telematics solutions presents a mounting challenge for service providers. To stand out in an increasingly competitive landscape, telematics solutions providers must find new ways to differentiate their products and services for commercial vehicle and fleet businesses, and drivers could be the key.
These are the latest findings of the Roadmap to Telematics Growth report from Escalent’s Fleet Advisory Hub™, a leading insights tool designed to explore the needs, expectations and emotions of commercial vehicle and fleet business decision-makers. Based on input from more than 1,000 fleet decision-makers, this study explores how commercial vehicle and fleet businesses are using telematics solutions today, the barriers to adoption commercial vehicle and fleet businesses face and their plans to invest in connected services in the future.
“While telematics adoption is on the rise, not all commercial vehicle and fleet decision-makers are fully convinced of telematics’ value. Only about one-quarter of current shoppers and half of current users say telematics are either critical to operating their business or fully meet their needs,” said Dania Rich-Spencer, a vice president in Escalent’s Automotive & Mobility division. “By helping fleet businesses understand and implement the operational and financial benefits of integrated, driver-focused solutions, providers can close that gap and position themselves as trusted partners throughout the customer journey in long-term fleet success.”
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Cyber Risk
Active Cyber Risk Management Drives 7% Decrease in Claims Frequency: Coalition -
Despite claims severity remaining stable in 2024, proactive cyber security measures show a measurable impact in claims frequency: Coalition reports.
Email-based attacks dominated the cyber threat landscape in 2024, with business email compromise (BEC) and funds transfer fraud (FTF) accounting for a combined 60% of all cyber insurance claims, according to Coalition’s analysis of its 2024 claims data.
Ransomware events, though representing only 20% of claims, inflicted the most financial damage with average losses of $292,000 per incident—significantly higher than FTF ($185,000) and BEC ($35,000) events, Coalition found.
Businesses taking a more active approach to managing cyber risk are experiencing greater success in reducing both the frequency and severity of threats, according to Coalition.
“Over the past year, our claims data clearly demonstrates one thing: active insurance works,” said Robert Jones, Global Head of Claims at Coalition. “Combining Coalition’s Active Data Graph, which provides a massive amount of data insights, with security tools and incident response helps Coalition prevent claims from happening in the first place.”
Overall, global cyber insurance claims frequency decreased 7% year-over-year in 2024 to 1.48%, with U.S. clients experiencing a higher rate (1.54%) than the global average, Coalition reported. By contrast, policyholders in Canada (1.13%) and the UK (1.09%) demonstrated notably lower frequency rates.