California has launched an inquiry into insurer State Farm’s handling of claims after the Palisades and Eaton wildfires in January.

The “market conduct examination” expands on an investigation into consumer complaints against the insurer, the California Department of Insurance says.

“While there are national standards for insurance claims handling, they can be vague and inconsistently applied, especially during large-scale, climate-driven disasters,” state insurance commissioner Ricardo Lara said.

“This examination will assess whether State Farm has complied with California’s consumer protection and claims handling laws and will help determine if further reforms are needed as natural disasters increasingly disrupt insurance markets across the country.

“Some troubling patterns that my staff will investigate include the 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.”

A market conduct examination involves a “thorough, fact-based review” that typically takes several months, the Department of Insurance says.

The department says the way some insurers, including State Farm, are handling smoke damage claims is an area of concern.

“The unprecedented urban impact of these wildfires has created new challenges and a lack of consistency as to how insurance companies are handling these claims – leading to confusion and delays for homeowners.”

By May 12, insurance companies had paid out nearly $US17 billion ($26.2 billion) to home and commercial policyholders affected by the fires, the department says.