State Farm must cut home rates immediately

State Farm Insurance Co. is ignoring part of an order to reduce rates by 7 percent for homeowners and renters in California and must cut rates immediately for more than 260,000 customers, the state’s top insurance regulator said Friday.

“I expect every insurance company to comply with my rate orders,” Insurance Commissioner Dave Jones said in issuing a notice of noncompliance. He ordered reductions for customers who buy or renew insurance policies between Dec. 8 and Feb. 13.

State Farm had sought a 6.9 percent rate increase for residential policies last year, but Jones, after holding hearings, concluded in November that the company’s rates were already higher than needed to pay its costs and a reasonable profit.

He ordered reductions of 5.37 percent for homeowners, 20.39 percent for renters and 13.81 percent for condominium owners. The statewide average came to 7 percent, because most of the policies are for homeowners, and the savings amounted to $84 million for 1.7 million California policyholders. Jones applied the same 7 percent reduction to rates charged since July 2015, requirState ing an additional $110 million in refunds.

State Farm sought to suspend the order while it challenged Jones’ order in court, but on Dec. 16, San Diego County Superior Court Judge Katherine Bacal ruled that the company must reduce ongoing rates during its appeal. She agreed to suspend the $110 million refund for past payments, noting that policyholders would receive those refunds, plus interest, if she eventually upheld the commissioner’s order.

But customers soon complained that State Farm wasn’t lowering rates for those who had been sent notices before Dec. 16 telling them they had 45 days to renew their policies. The company insisted it was in compliance, but Jones said late Friday that State Farm was required to issue reductions for everyone who had a policy in effect on Dec. 8 — the day his order was due to take effect — regardless of when it was to expire.

Based on the number of State Farm ratepayers, he said, the company’s “refusal to timely implement the rate reduction” could affect more than 4,000 policyholders each day from Dec. 8 to Feb. 13, when State Farm was planning to start lowering rates. That adds up to about 264,000 customers.

Farm denied violating Jones’ order and repeated its earlier assertion of the proper timing of rate reductions.

“We took immediate steps to comply with the rate reduction after receiving the ruling of the trial court over the weekend of Dec. 16. The new reduced rates currently are and, after that weekend, have been included in outgoing renewal bills, which must be sent out by law at least 45 days in advance,” company spokesman Sevag Sarkissian said.