State Farm, the largest homeowners’ insurance provider in California, announced that the company is seeking to increase premiums by an average of 30%. The proposed hike, which would affect more than 1.2 million homeowners across the state, comes on the heels of two rate increases made by the company earlier in the year – 7% and 20%.
If this new increase goes into effect, nearly all policyholders could see their premiums rise between 25% and 35%, translating to hundreds or even thousands of dollars depending on their current coverage. With State Farm insuring roughly one in five homes across California, this increase could have widespread and significant effects on homeowners statewide.
Reasons for the Increase
State Farm cites the need to recover from billions in losses due to wildfires and other catastrophic weather events. The company aims to raise premiums starting early next year, pending regulatory approval. Consumer advocates, however, are urging the California Department of Insurance to rigorously review State Farm’s justification for such a steep hike.
Additional Increases for Renters and Condo Owners
In addition to homeowners, State Farm is seeking to raise rates by 52% for renters and 36% for condo owners. This move is part of the company’s broader strategy to ensure long-term sustainability in California amid rising costs and increased risks.
Regulatory and Industry Context
California’s insurance rates are among the most tightly regulated in the country, keeping them lower than many other states. However, the insurance industry argues that these regulations are no longer tenable due to increasing wildfire threats and rising building costs. Many providers, including State Farm, have stopped issuing new policies in the state, particularly in fire-prone areas, pushing homeowners towards the expensive FAIR Plan, California’s insurer of last resort.
Financial Background and Regulatory Review
State Farm reported net losses of over $6 billion in both 2022 and 2023 due to a spike in catastrophe claims. To justify the proposed rate hike, State Farm must demonstrate that the increase is essential for its financial stability. The California Department of Insurance, led by Commissioner Ricardo Lara, plans to investigate the company’s financial condition before making any decision.
The review process may include mandatory public hearings if consumer groups challenge the proposal.
