In the aftermath of destructive wildfires across Los Angeles, California, regulators have given State Farm the green light to temporarily raise insurance rates across multiple policy types, including a 17% rate hike for homeowners. The California Department of Insurance announced Tuesday, May 13, that the increase would take effect immediately and remain in place at least until a formal hearing later this year.
The approval also allows State Farm to raise premiums by 15% for renters’ and condo insurance policies, and by 38% for landlord coverage.
State Farm points to strain on system
This latest hike follows a 20% rate increase State Farm received in 2024. The company — which insures approximately 1 out of every 5 homes in California, or around 1 million homeowner policies — argued it needed urgent relief following the fires that swept through the Pacific Palisades and Altadena neighborhoods in January.
Those fires destroyed more than 16,000 homes and structures, prompting the insurer to file for what it called an “emergency rate increase” in February. In that request, State Farm sought a nearly 22% hike on homeowners’ policies, citing what it called a “dire situation.”
State Farm’s statement following approved rate hike
State Farm defended its position, pointing to growing financial strain as wildfires become more frequent and costly. The company said the rate increase will help, but it remains concerned about its future in the state.
“We remain deeply concerned about the financial position of State Farm General, as it is difficult to match price to risk in California,” the company said in a statement. “As we continue to emphasize in our ongoing interim rate filing, we need immediate rate increases to help stabilize State Farm General’s financial condition to be able to serve our California customers for the long-term.”
The company added, “We remain focused on helping our customers recover from the wildfires. As of May 12, we have already paid more than $3.51 billion and are handling more than 12,692 claims.”
California’s insurers must get approval from the state before they can increase rates, which has resulted in several large companies either not accepting new applications or leaving the state entirely.
State insurance commissioner calls decision a ‘tough’ one
In a press release, California Insurance Commissioner Ricardo Lara acknowledged the difficulty of the decision.
“Let me be clear: We are in a statewide insurance crisis affecting millions of Californians,” Lara said. “Taking this on requires tough decisions. This is not a game. This is not a media-driven moment for some to exploit — this impacts people I am committed to protecting.”
Consumer advocates warn of industry pressure
Consumer Watchdog, a nonprofit organization that challenged the increase during hearings this spring, warned that California is facing pressure from large insurers demanding rate hikes — or threatening to exit the market. The organization condemned the decision in a press release.
“Raise rates, or we leave the state,” said Carmen Balber, executive director of the group, summarizing the ultimatum insurers have posed. “State Farm policyholders, many of whom are struggling to get their claims paid by the company after the Los Angeles fires, are now facing double-digit rate hikes. Today’s decision forcing consumers to pay now but allowing State Farm to wait months before having to show its math is a great disappointment for consumers.”
With the interim rate increases now in effect, all eyes will turn to the upcoming hearing, where state officials, consumer groups and insurers are expected to debate the future of California’s increasingly volatile insurance landscape. According to the watchdog group’s press release, that future hearing is tentatively scheduled for October.
It also says that condo owners or renters could pay an estimated $57 more per year, rental dwelling individuals could pay up to $451 more, homeowners may pay as much as $468 per year more than they currently are.
How does California compare to other states’ premiums?
California’s homeowners’ insurance premiums are generally lower than the national average, according to Bankrate, a financial services company. For instance, the average annual premium for a $300,000 dwelling in California is approximately $1,383, compared to the national average of $1,754, according to Policygenius.
However, this apparent affordability is offset by increasing challenges in obtaining coverage. Major insurers have reduced their presence in high-risk areas, leading many homeowners to rely on the California FAIR Plan, the state’s insurer of last resort. The FAIR Plan offers limited coverage and comes at a higher cost, with average premiums around $3,200 annually.
