The California Department of Insurance (CDI) has launched an investigation into State Farm General Insurance Co.’s handling of claims stemming from catastrophic Los Angeles wildfires in January, focusing on “troubling” patterns in the insurer’s practices. While the CDI routinely examines all carriers, this inquiry is a response to emerging concerns regarding how the company managed a surge of wildfire-related claims.
Insurance Commissioner Ricardo Lara initiated the investigation after reports of inconsistencies in State Farm General’s claims process following the record-setting blazes. The CDI’s examination will delve into several key areas, including the reported frequent reassignment of multiple adjusters “with little continuity in communication,” inconsistent management of similar claims and inadequate record-keeping or information-sharing among claims teams, according to Lara. This scrutinization aims to ensure compliance with state regulations and protect policyholders who suffered significant losses.
Gabriel Sanchez, a spokesperson for the CDI, confirmed that the department has no immediate plans to open market conduct examinations into other carriers, though this could change if additional information or consumer complaints emerge. Any future investigations would be based on “specific issues facing those insurers and an objective review of complaints against those insurance companies,” Sanchez said. State Farm General has undergone three market conduct exams by the CDI since 2014, a number slightly ahead of other companies.
State Farm, in response to the investigation, issued a statement asserting that regulators “routinely examine all insurance companies. These exams help ensure processes and procedures are in full compliance with state regulations. Our efforts will remain on serving all our customers and meeting our obligations under the contract while providing the necessary information to the CDI.”
As of June 12, State Farm General had received more than 12,870 claims related to the Los Angeles wildfires, paying out over $4.03 billion, with approximately 2,500 policyholders experiencing total losses.
The CDI has a track record of intervening on behalf of policyholders, having recovered more than $40 million for those affected by the Eaton and Palisades fires through formal consumer complaints. This amount represents a small fraction of the $17 billion residential and commercial lines carriers paid out through May 12 for claims from the same event. State Farm General currently holds a Best’s financial strength rating of B (Fair).
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