State Farm asks for approval to increase California home insurance rates by an average of 22%

Citing the “dire” financial situation they’re facing after the Los Angeles wildfires, State Farm General has asked California officials for an emergency interim rate increase.

The rate hike could work out to an average increase of 22% for California homeowners, State Farm General revealed Monday.

“The costs of the January 2025 wildfires will further deplete capital from State Farm General. Capital is necessary so an insurance company can pay for any future claims for the risks it insures,” State Farm General said in an open letter to the California Department of Insurance.

In the wake of the wildfires, State Farm General noted that they had already received more than 8,700 claims as of Feb. 1 – paying out more than $1 billion, with the company noting that they expect to pay out “significantly” more.

State Farm General also had a blunt warning to Californians about the future of insurance in the state.

“Insurance will cost more for customers in California going forward because the risk is greater in California,” the company stated.

California’s Department of Insurance stated that State Farm’s rate filings are raising “serious questions” about the company’s financial situation, but no action has been taken yet.

“To protect millions of California consumers and the integrity of our residential property insurance market, the Department will respond with urgency and transparency to recommend a course of action for Commissioner [Ricardo] Lara,” the California Department of Insurance stated. 

Insurance expert Karl Susman said California homeowners pay less than homeowners in most states in the country, adding that climate change and wildfire risks have not been priced into the market yet. 

“[State Farm is] telling the Department of Insurance, ‘hey, it’s time. We need to start bringing rates more in line with what the actual risks are here in Southern California in order for us to stay viable in California,’ ” Susman said. “It’s not realistic for anyone to think that the prices we’re paying to ensure ourselves in this area is not going to go up. The risk is clearly going up.”

In the letter State Farm sent to the state, the company said, “Over the last nine years, the lack of alignment between price and risk means that for every $1.00 collected in premium, State Farm General has spent $1.26.” 

State Farm is also requesting a 15% hike for condo owners and 38% for renters. If approved, they would take effect May 1. 

For one homeowner in Auburn, this new ask from State Farm comes after his policy renewal. Even with a firewise community discount, the increase for Gary Gilligan’s policy is eye-popping — “$5,211.50 due by March 1,” he said.

That’s an 87% jump from a year ago when Gilligan said “we paid $3,217.” 

“Well, we were planning a trip to Disneyland for my birthday, I’m turning 60, so we ended up canceling that,” Gilligan said, “because we have to pay this extra $2,000 and we don’t have that money right now.” 

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• Homeowners Insurance