State Farm rate hike stands at 17% for California homeowners after settlement with state

State Farm’s interim 17% emergency rate hike for homeowners approved in 2025 without a public hearing will stand after a settlement between the California Department of Insurance and a consumer watchdog group.

In the settlement announced last week, State Farm agreed not to pursue a 30% hike it sought last year to cover a landslide of claims following the deadly wildfires that devastated several Los Angeles County communities. 

Instead, certain property owners will see their rates go down while renters will see a slight increase.

The agreement will be reviewed by an administrative law judge for final approval as early as April 7, the three parties stated in separate announcements.

Last May, state Insurance Commissioner Ricardo Lara approved a 17% emergency rate hike for State Farm homeowners, a 15% increase for renters and condo owners and a 38% jump for rental dwellings, all of which took effect June 1. Rates will not return to what they were before the emergency hike, according to the agreement. But some policyholders will get refunds, including owners of condos and rental dwellings.

For renters, premiums will rise to 15.65% over last year’s interim rate of 15%. That’s still below State Farm’s 52% original rate increase.

Condo unit owners will save a combined $48.9 million with a 5.8% hike in rates, down from 15% that Lara initially approved last year and the 36% hike that State Farm wanted. The settlement provides refunds of $17 million plus 10% interest dated back to June 1, the department said.

Rates will rise 32.8% for rental dwellings, down from the 38% hikes previously approved. Property owners are getting refunds of $35 million and 10% interest.

State Farm also agreed to a new rate review process by 2027 for emergency rate requests, to halt mass nonrenewals of homeowner policies during 2026, and to continue coverage for certain policies previously slated for nonrenewal in wildfire-affected areas.

As State Farm’s financial condition improves, policyholders will get a one-time 2.5% premium discount when renewing policies, according to the insurance department.

The agreement follows months of litigation by Consumer Watchdog, which argued the insurance department had placed the cart before the horse by not holding a hearing when Lara approved the interim rate hike for the state’s largest insurer.

The insurance department says the new agreement will provide “financial relief to many policyholders while ensuring continued coverage for State Farm policyholders while California’s insurance market stabilizes.”

After the fires, the insurer claimed it was in a precarious spot financially and needed an emergency $1.02 billion lifeline to stay afloat.

To date, State Farm has issued over $5 billion in payments to families whose cars, homes and property were damaged or destroyed by the January 2025 Los Angeles County wildfires, the insurer said on Feb. 26 in reporting its 2025 financial results. “Because many claims, repairs and rebuilds are still underway, it is anticipated that total payments could reach $7 billion,” according to the State Farm report.

Harvey Rosenfield, the author of Proposition 103 — a voter-approved measure giving his group the plank to review rate cases — said the emergency rate increase was unprecedented in California.

“Proposition 103 ensures that insurance companies cannot simply impose large rate increases without independent scrutiny,” Rosenfield said. “When consumer advocates are able to challenge the data and present their own analysis, excessive requests are reduced and consumers are protected. This settlement demonstrates how that public oversight works in practice.”

While Consumer Watchdog says California consumers will save about $530 million in the agreement, the insurance department disputes the figure.

Insurance department spokesman Gabriel Sanchez says the calculation on savings are Consumer Watchdog’s.

“We don’t know how they calculated them so we can’t speak to them,” Sanchez said.

“With this agreement the interim homeowners rate increase of 17%, which went into effect in June 2025, will become final pending approval,” said State Farm spokesman Tom Hartmann. “This rate enables State Farm General to continue serving existing California customers. We will continue to monitor our capacity to support the risks we insure and maintain the financial strength needed to pay claims and support customers and communities when it matters most.”

The interim rate case is separate from State Farm’s request on June 28 for a 31.4% rate change for $1.13 billion.

State Farm is made up of several mutual companies in the U.S. In California, the State Farm General division, which is the largest insurer in the state, insures more than 1.2 million policyholders for homeowners’ insurance.

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