SACRAMENTO — As if plummeting real estate values weren't enough, insurance rates are heading up for many California homeowners.
State Insurance Commissioner Steve Poizner late last month quietly approved rate-increase requests from two of the state's three largest homeowner insurance companies. No. 1 State Farm Mutual got the go-ahead for a 6.9% increase, its first in five years, while rates at third-place Farmers Group Inc. will rise 4.1%.
A similar request for a 6.9% increase from No. 2 Allstate Corp. is pending at the state Department of Insurance. The three insurers cover about 2.5 million policyholders, more than half of the insured homes in California.
Some consumer advocates denounced the rate increases.
"In an economy like this, Californians are relying on the insurance commissioner to keep premiums as low as possible," said Douglas Heller, executive director of Santa Monica-based Consumer Watchdog.
Others said they could understand why the commissioner granted the requests, given the hundreds of wildfires that have swept the state this year. "I think there is going to be a general perception out in the world that insurance companies are going to have to raise their rates," said Amy Bach, executive director of United Policyholders in San Francisco.
Insurance claims from Southern California's three most recent major wildfires, which damaged or destroyed more than 1,000 homes, could reach $800 million, according to AIR Worldwide, a Boston firm that estimates catastrophe damage.
Sometimes rate increases are appropriate, said Poizner spokesman Darrel Ng. "Unfortunately, insurance rates can't keep decreasing forever," he said. "Homeowners' rates have gone down nearly $800 million since Poizner took office" in January 2007.
State Farm spokesman Bill Sirola said the rate hike was justified and was based largely on documented increases in the costs of repairing damaged structures as well as a rise in other types of claims covered by homeowner policies. Those other claims could arise from such disparate causes as a dog biting a mail carrier or a tree falling on a roof.
State Farm cut rates 6.2% in 2003 and 20% in 2007, Sirola said.
"They go up and they go down because our primary obligation is to make sure we're generating enough revenues to pay our claims and put some money aside for future catastrophes," he said.
