California insurance commissioner approves State Farm emergency rate hike
Insurance Commissioner Ricardo Lara will allow State Farm to raise its rates by an average of 17% for homeowners across California in an effort to improve its finances.
The decision Tuesday came after State Farm General Insurance Co. in February urgently asked Lara to let it increase prices following the devastating wildfires in the Los Angeles area and after a three-day hearing in front of an administrative law judge last month.
“Let me be clear: We are in a statewide insurance crisis affecting millions of Californians,” Lara said in a statement. “Taking this on requires tough decisions.”
As part of an agreement, State Farm’s California business will receive $400 million in aid from its parent company. The price increase will go into effect June 1. And State Farm said it would not start any new “block nonrenewal programs through the end of 2025,” in which large numbers of homeowners are told that their policies will no longer be covered.
The judge, Karl-Fredric Seligman, in an order Monday said the evidence from the hearing showed “State Farm is experiencing extraordinary financial distress,” called the agreement “fundamentally fair” and recommended that Lara approve it.
The price increase will be revisited during a hearing later in the year.
State Farm executives warned that claims from the January Southern California fires could cut into its reserves when it asked for the emergency hike. In California, companies must have rate increases signed off on by the Department of Insurance.
Sevag Sarkissian, a company spokesperson, said in a statement that State Farm had paid out more than $3.5 billion and is handling more than 12,690 claims following the fires. Sarkissian called Lara’s approval “a critical first step” for the company’s “ability to continue serving our California customers.”
Consumer Watchdog, an advocacy organization that frequently tussles with insurance companies, had urged Lara to reject the agreement. Its executive director, Carmen Balber, in a statement Tuesday said it “adds insult to injury for consumers to be forced to pay significantly more for coverage when some of these same consumers may be simultaneously trying to recover from the fires.”
Seligman acknowledged that a financial burden was being placed on policyholders, calling it “an unfortunate but necessary consequence given the circumstances.”
Lara said he made the decision to protect all State Farm customers and the insurance market as a whole.
This story was originally published May 13, 2025 at 1:17 PM.
