State Farm Asks to Raise Insurance Premiums 22% After LA Fires
State Farm is requesting the government of California to approve an emergency rate increase of 22% in response to the recent fires in Los Angeles.
As the largest private insurance company in California, State Farm covers millions of properties statewide. In a letter to the California Department of Insurance (CDI), State Farm asked the government agency to “immediately approve” the request.
State Farm justified the price hike by saying it would help “avert a dire situation.”
Some California insurers are failing to renew policies. Others are hiking rates. Some are pulling out of the state entirely.
State Farm is specifically requesting permission to increase rates by the following amounts:
- 22% for non-tenant homeowners
- 15% for renters and condo owners
- 38% for rental units
If the CDI approves the request, State Farm’s higher rates will take effect on May 1, 2025, for millions of policyholders across California.
The 2025 Fires Are the Costliest Disaster in State Farm History
State Farm has a reason to charge higher rates: the company is facing the costliest disaster in its 102+ year history.
In the letter to the CDI, State Farm claims it received more than 8,700 claims from the latest fires in Los Angeles while paying more than $1 billion to policyholders – and they expect to “pay out significantly more” in the coming months.
Increasing rates, State Farm added, would allow the company to cover possible claims in the future. As California’s risk of natural disasters increases, insurers like State Farm seek to raise premiums to accommodate the risk.
If State Farm is unable to raise premiums to match risk in California, it could cancel more policies.
State Farm Canceled 72,000 Policies in California in Early 2024
In March 2024, State Farm made headlines for failing to renew 72,000 insurance policies for homes and apartments across California – including homes and apartments that were later affected by the 2025 Los Angeles wildfires.
In a letter to the CDI at the time, State Farm argued the cancellations were necessary because “rapid and transformational action” was needed to address rising risk in the state.
State Farm wasn’t the only company reducing operations in California. Allstate, Nationwide, and Farmers also failed to renew policies or stopped writing new ones in response to rising risk.
Prior to the cancellation, State Farm had already raised premiums. The CDI granted State Farm the ability to increase home and auto insurance premiums by 20% in January 2024. State Farm later requested a 30% increase in homeowners insurance in summer 2024.
Price hikes, however, take time to be approved by the CDI – which is one reason State Farm is requesting a 22% “immediate” price hike from the CDI today.
What Comes Next for California Homeowners?
It could be an expensive few years for homeowners in California.
First, California’s FAIR Plan may run out of money, forcing the government agency to charge a one-time fee of around $1,000 to policyholders across the state – even policyholders who have never made a claim or experienced a wildfire.
California established the FAIR Plan to be the insurer of last resort. If homeowners and business owners can’t obtain property insurance through the marketplace, they can buy through the FAIR Plan. The 2025 Los Angeles wildfires, however, could wipe out the FAIR Plan’s budget, forcing the agency to charge all policyholders across the state.
Second, insurers could cancel your policy or avoid renewing your policy. State Farm, Allstate, Progressive, Nationwide, and Farmers were some of the insurers who avoided renewing policies in California last year, leaving tens of thousands of property owners without coverage. As risk increases and insurers can’t hike prices to match, more could leave the state.
Third, insurers could simply raise rates by 22%, on average. If the California Department of Insurance approves State Farm’s latest price hike request, insurers could charge more for policies. As risk continues to rise, insurance premiums are also expected to rise. State Farm has asked for an average rate increase of 22%, with some property owners paying significantly more than that amount. State Farm wants to increase insurance prices by 38% for rental units, for example.
With wildfires continuing to occur year-round in California, it’s harder for insurers – and more expensive for homeowners – to adequately protect property. Stay tuned for what comes next.
