California Approves 17% Rate Hike for State Farm, State Farm Requests Additional 11% Rate Hike
California’s Department of Insurance has approved an emergency 17% rate hike on State Farm.
State Farm originally asked for a 30% increase due to rising risk and increased costs.
A judge approved the rate hike after a three-day hearing in Oakland in early April, and the decision was adopted by California’s Department of Insurance Commissioner Ricardo Lara in May.
The decision specifically grants State Farm the ability to:
- Raise homeowners insurance premiums by 17%
- Raise renters and condo insurance premiums by 15%
- Raise rental owners policies by 38%
All rate increases are expected to take effect on or after June 1 (i.e. whenever your policy gets renewed after June 1).
State Farm Must Meet Certain Requirements
State Farm is allowed to raise rates – but there are strings attached.
Some of the requirements State Farm must meet include:
- State Farm’s California subsidiary must agree to receive a $400 million cash infusion from State Farm Mutual, its nationwide parent company. This cash infusion is expected to lower the burden on California policyholders and taxpayers (without the cash infusion, State Farm’s losses would be spread across other insurers and policyholders in the state).
- State Farm must also agree to a lower rate increase. State Farm had originally requested a 30% average increase statewide (along with a 36% increase for renters and condo owners and a 52% increase for rental owners).
- State Farm must not issue large-scale non-renewals through the end of 2025. State Farm was criticized in 2024 for cancelling thousands of policies in California because of a higher risk of wildfires. State Farm is prohibited from taking similar massive action through the end of 2025.
State Farm is Already Requesting Another 11% Rate Hike
On May 21, State Farm requested an additional 11% rate hike – just one week after California approved the 17% rate hike.
State Farm had originally requested a 30% rate hike, and the 11% rate hike gets State Farm closer to that original number.
State Farm argues the original 30% request was inspired by “severe capital depletion” after disasters like the 2025 Los Angeles fires. The company still needs 30% higher premiums to address that capital depletion:
While we are pleased that Commissioner Lara approved the interim rate of 17% for State Farm General Insurance Company, this change only addressed part of the original request of 30% filed in June 2024.
If the California Department of Insurance approves the new rate hike, policyholders could pay significantly higher rates moving forward. According to The Guardian, the average policyholder would pay:
- $600 more for homeowners insurance
- $163 more for condo owners insurance
- $30 more for renters insurance
State Farm, meanwhile, is expecting to pay around $7 to $8 billion in losses from the Los Angeles fires of 2025.
In that same May statement advocating a price increase, State Farm acknowledged it was “deeply concerned” about the company’s financial position:
We remain deeply concerned about the financial position of State Farm General, as it is difficult to match price to risk in California.
As proof, State Farm pointed to S&P Global’s rating action against the company: the organization recently lowered the financial strength rating of the California subsidiary from AA to A+. The organization also received a CreditWatch – Negative rating.
A California judge may have approved the 17% rate hike earlier this month, with changes expected to take place on June 1. However, it remains to be seen if this new hike will also be approved.
