Department of Insurance, Consumer Watchdog, and State Farm reach settlement agreement on State Farm's prior emergency interim rate request

The California Department of Insurance, Consumer Watchdog, and State Farm General Insurance Company today reached a three-party settlement agreement in the full rate hearing proceeding that is underway to review State Farm's emergency rate request. The agreement will provide financial relief to many policyholders while ensuring continued coverage for State Farm policyholders while California's insurance market stabilizes.

This settlement agreement, now set to be reviewed by an impartial administrative law judge, follows months of public review and negotiation called for by Insurance Commissioner Ricardo Lara under California's voter-approved Proposition 103 rate hearing process. The settlement reflects the department's responsibility to carefully review insurance rates and ensure they are justified, transparent and fair for California consumers.

When he called for the hearing on March 14, 2025, Lara said, "To resolve this matter, I am ordering State Farm to respond to questions in an official hearing, promoting transparency and a path forward."

This proceeding called for by Lara required State Farm to provide detailed financial information and testimony regarding its rate request and financial condition, after the Eaton and Palisades fires in Los Angeles, as part of the public review process prescribed under Prop 103.

Under California's rate hearing regulations, the Insurance Commissioner is separated from the negotiation and any details of the evidentiary proceeding while it is underway in order to preserve an impartial and fact-based process.

Since that time, the rate hearing proceeding — including at least nine public appearances and advocacy before the administrative law judge regarding multiple discovery motions and disputed evidentiary issues between the parties, as well as status and scheduling conferences, and also including three formal and multiple informal settlement conferences between the parties — has been conducted with participation from experts from the California Department of Insurance and representatives from Consumer Watchdog and State Farm.

Under the settlement agreement reached between the California Department of Insurance, State Farm and Consumer Watchdog, the commissioner's prior order granting State Farm's request for an emergency interim rate increase has been confirmed with the following modifications:

Homeowners (non-tenant) policies

The interim rate of +17.0 percent will remain in place, meaning there will be no additional impact to policyholders beyond the currently approved interim rate.

Rental dwelling policies

The previously approved interim rate of +38 percent will be reduced to +32.8 percent, resulting in a rate refund for affected policyholders with 10 percent interested back to June 1, 2025.

Condominium policies

Rates will be reduced from 15 percent to approximately +5.8 percent, which means policyholders will receive refunds and 10 percent interest back to June 1, 2025.

Renters insurance policies:

The renters subline will see a slight increase to approximately +15.65 percent from a currently approved interim rate of 15 percent.

Refunds with interest

Consumers whose rates were reduced will also receive refunds with 10 percent interest retroactive to June 1, 2025.

In addition, the agreement includes an extension of the current moratorium on homeowners, rental dwelling, condominium, and renters non-renewals and cancellations for at least one additional year, providing continued stability for affected policyholders while the department continues its broader efforts to stabilize California's insurance market under its Sustainable Insurance Strategy.

"This rate hearing process reflects the strength of California's transparent and long-standing consumer protections," said Michael Soller, Deputy Commissioner for Communications and Press Relations. "Our department's role is to carefully review the data and hold insurance companies accountable so Californians are not paying more than is justified."

Under California's administrative rate hearing procedures, the parties have now submitted the three-party settlement agreement and supporting documentation to the administrative law judge for review.

Settlement process timeline

March 6, 2026

Parties file the settlement agreement with the administrative law judge.

March 20, 2026

Supporting declarations to be filed with the administrative law judge.

April 7, 2026 (estimated)

Proposed independent decision issued by the administrative law judge if no additional evidence is requested.

Following the proposed decision, Lara will review the proposed decision and make a final decision.

At a later date, Consumer Watchdog may submit a request for intervenor compensation for its participation in the rate review and settlement process, as authorized under Prop. 103. If approved, the compensation amount – to be paid by State Farm policyholders – will be determined through a separate review process. Learn more about the intervenor compensation process at the department's website.

Separately, the California Department of Insurance continues its market conduct examination of State Farm General, which is reviewing the company's claims handling practices and compliance with California law.

Results from that examination are expected later this spring.