Secret video: State Farm exec appears to confess to manipulating California insurance rate hikes

OAKLAND, Calif. - An alarming video of a State Farm executive apparently discussing the company’s efforts to strategically hike rates on California policyholders is circulating online. 

Although the context of the video and veracity is unclear, Consumer Watchdog found it concerning enough that the advocacy organization has written an open letter to the California Insurance Commissioner asking for an investigation.

The video was posted on YouTube on March 5 by the O’Keefe Media Group, created by James O’Keefe, the founder of Project Veritas. 

The right-wing activist organization is known for secretly recording and releasing deceptively edited videos aimed at attacking progressive organizations and mainstream media.

It’s unclear where the video was recorded or when, but it looks to be sometime after the L.A. wildfires, and references the Palisades Fire in particular. 

The video appears to depict State Farm’s President of Innovation and Venture Capital, Haden Kirkpatrick, telling an unknown person at a bar that the insurance company is using cancelations and the threat of cancelations in California to pressure the State Insurance Commission to allow rate increases.

An unknown interviewer asks, "I heard that the insurance pulled out of California fire. It seems like it's all, I don't know, orchestrated."   

"I mean it kind of is, but not in the way you would think," Kirkpatrick answers, explaining how the company allegedly uses the threat of widespread policy cancelations to pressure the California Insurance Commission into approving its desired rate hikes. 

"We’ll go to the Department of Insurance and say we’re overexposed here, you have to let us catch up our rating," Kirkpatrick continues. "And they’ll say ‘eh’ because the Department of Insurance and the Insurance Commissioner is an elected position in California. He’ll say ‘nah.’ And we’ll say, ‘Okay, then we are going to cancel these policies.’"

It does not appear that the State Farm executive knew he was being recorded. 

If it was in California, that could be a violation of California state laws which require both parties to consent to being taped. 

State Farm responded to KTVU's request for comment on Sunday, by saying, "These assertions are inaccurate and in no way represent the views of State Farm. They do not reflect our position regarding the victims of this tragedy, the commitment we have demonstrated to the people of California, or our hiring practices across the company. The individual in the video is no longer affiliated with State Farm." 

The exact details of Kirkpatrick's departure from State Farm are not public, but the LA Times reports that Kirkpatrick told the paper he was secretly recorded while on a Tinder date and believes he was "set up."

O’Keefe Media Group had not responded to KTVU’s request for comment by the time of this story’s publication.

State Farm asked the state of California if it could temporarily raise homeowners’ insurance rates because the company asserted that paying out claims for the Los Angeles wildfires was hurting its finances, KTVU reported in February.

READ: State Farm asks California again to raise homeowner insurance rates by 22%

Closed-door meeting in Oakland

The backstory:

On Feb. 26, California Insurance Commissioner Richard Lara and State Farm held a closed-door meeting in Oakland to discuss the request. At the time, Lara said he was considering the idea despite turning it down earlier this year. 

Now just more than a week later, Consumer Watchdog referred to that meeting in its letter to Lara regarding the Kirkpatrick video and accused State Farm of dealing with the regulators and its customers in "bad faith."

The group didn’t mince words.

"These remarks strongly suggest that policy cancelations are being wielded as a strategic bargaining tool rather than as a necessary response to financial risk," Consumer Watchdog’s attorneys wrote. "This contradicts the impression State Farm sought to convey at the meeting—that it would remain in the market if rate relief were granted."

The founder of Consumer Watchdog, Harvey Rosenfield went even further.

"You could look at it one way and say that State Farm has been engaged in Federal wire fraud, but submitting rate applications that it really doesn't need," Rosenfield said. "State Farm could be subject to both civil and criminal investigations. In fact, the next step should be for the Attorney General of California to investigate State Farm."   

Early last month, State Farm sent a letter to the state saying that it wants to raise its rates by about 22% for California homeowners, which would affect about one million people.

In the letter, the insurance company said it has already paid out more than $1 billion for just a few thousand claims after the destructive L.A. wildfires. It estimated that it will eventually pay out $7.6 billion.

The insurance company went on to say it can pay out what it owes, but its capital is taking a huge hit and that temporary rate hike will help in order for State Farm to "continue helping California customers."

But in the controversial video circling online, Kirkpatrick can be heard making statements that appear to undermine State Farm’s claims and assurances.

"So, we're constantly going and saying our data indicates that are rates need to increase faster and faster and faster and faster and faster," he said.

Lara ended the Feb. 26 closed-door meeting in Oakland saying that he’d consider State Farm’s request and the public will know in two weeks whether a temporary rate hike will be approved or not.

Consumer Watchdog

What they're saying:

With just days remaining until that two-week deadline, Consumer Watchdog is urging Lara to take Kirkpatrick’s statements in the online video into serious consideration and deny the rate hikes, instead asking for an investigation into State Farm’s practices.

"There is no justification for approving an unprecedented interim rate increase request, especially if State Farm intends to pocket the cash and abandon consumers," the advocacy group wrote in its letter. "Consumers should not be forced to fund State Farm’s exit strategy from the California market."

The fallout from this newest development could have long-standing implications for California policyholders.

Why you should care:

State Farm’s rate increase, if approved, could increase costs for its customers by more than $600 per year, according to Rosenfield’s estimates.

But it could also dramatically spike costs for all homeowners across the state, no matter their insurance carrier.

"As soon as State Farm started to do it, all the other insurance companies began to do the same thing," Rosenfield said.

 

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