State Farm Seeks Another 11% Hike for California Homeowners Insurance | Insurify

Fresh off last week's 17% rate hike approval, State Farm is seeking a further 11% increase to its home insurance rates in California.

The 17% rate increase approval will affect all new or renewed policies starting in June. And, if the California Department of Insurance approves State Farm's second 11% increase, policyholders could pay 28% higher premiums starting in 2026.

State Farm had originally requested a much larger increase in 2024. After winning approval for a pared-down 17% rate hike, State Farm updated its 2024 filing to reflect the new request.

"State Farm General's current rates jeopardize its ongoing business operations, because they do not allow State Farm General to recover sufficient premium to cover its losses — and have not for many years — which has led to a dramatic reduction in State Farm General's surplus over time," the insurer wrote in its updated rate request.

Even higher rate increase requests for renters

While homeowners could face a considerable increase in their home insurance policies, the insurer's proposed increases for California's renters are even more dramatic.

The San Francisco Chronicle reported that State Farm is seeking to increase condominium premiums from 15% to 36% and renters insurance rates from 15% to 52%.

The insurer is also requesting final approval to boost landlord insurance rates by 38%, the Chronicle reported.

The latest rate request in a long history

State Farm is no stranger to requesting rate hikes in the California market.

In February, the insurer asked the California Department of Insurance (CDI) for a 22% emergency rate increase. State Farm stated it needed the increase to stay solvent and cited the 2025 Southern California wildfires in its request.

A judge ruled in favor of State Farm's emergency rate increase in April, ruling it was a "fundamentally fair, adequate, and reasonable decision" due to State Farm's "precariously weak position."

California Insurance Commissioner Ricardo Lara also approved the increase.

Last week's 17% approval is contingent on a hearing this fall. If the hearing determines that State Farm's rate increase request wasn't necessary, the insurer will be responsible for reimbursing policyholders.

"I am balancing all the facts," Lara said in a previous press release discussing State Farm's rate increase request. "Protecting all State Farm customers and the integrity of our insurance market is an urgent matter."

Some industry watchers, though, aren't so sure previous rate increases have provided any help.

"What I think is clear from today's rate filing is that the commissioner didn't win anything for Californians in this proceeding," Carmen Balber, executive director of the Consumer Watchdog organization, told the Chronicle following State Farm's new 11% increase request.

State Farm, meanwhile, views the judge's decision as evidence to validate its updated request. "The Commissioner, in adopting the ALJ's Proposed Decision, held that State Farm General has 'established a prima facie showing that State Farm is in extraordinary financial distress, coupled with surplus depletion that jeopardizes ongoing business operations[,]'" the insurer wrote in its rate increase request.

Rising costs for an already expensive home insurance market

California already has the second-fastest rising home insurance premiums in the U.S., according to a recent Insurify report.

Insurify data scientists estimated that the state's average homeowners insurance rate will rise 21% by the end of 2025, from $2,424 per year to $2,930.

Recent wildfire damage and California's high cost of living are driving forces for increases in state insurance costs.

The Eaton and Palisades wildfires caused an estimated $7 billion in damages to State Farm-insured homes, with $3.5 billion paid out for claims, according to a company spokesperson. As a result, the insurer's surplus dropped from $2.2 billion in 2022 to $620 million in 2024.

Insurers use surplus funds to pay out claims, and surplus helps determine a company's financial strength. A low surplus could mean State Farm isn't financially strong enough to pay out claims.

What's next? All eyes on the fall hearing

Lara hasn't yet made any decision on State Farm's latest rate increase request. And the approval of any new rate increase would also likely be subject to review at the hearing this fall.

State Farm hasn't publicly commented on this latest rate increase request, but the insurer did cast doubt on whether it'd be able to do business in California without the additional rate increase.

"State Farm General will be unable to operate in California for most consumers with mortgages if its financial strength rating further declines, which plainly demonstrates State Farm General's extraordinary financial distress and the imminent need for a permanent rate increase," the insurer wrote.

Related articles