Home Insurance Rate Hikes Approved in California
SAN FRANCISCO, CA (KGO) — State regulators have granted approval for two home insurance companies to increase their rates in California, impacting 660,000 customers. Mercury General and Safeco will implement these changes, affecting homeowners across the state.
Mercury General, the fifth-largest home insurer in California, will see an average rate increase of 12 percent for homeowners, effective in late March. According to a company spokesperson, the increase is primarily driven by rising construction costs, rather than the recent wildfires.
“Mercury filed for a homeowners rate increase in June 2024 to help offset increasing severity related to plumbing-related water losses and rising repair & construction labor and materials costs. This filing is not related to the recent Southern California wildfires, however, it was designed to allow Mercury to continue to provide high-quality homeowners insurance to a broad array of California consumers.”
Safeco, a subsidiary of Liberty Mutual, will implement an average rate increase of 7.2 percent beginning in May. This increase will not affect condo owners or renters. The San Francisco Chronicle reports that Safeco plans to exit the condo and renters markets in 2026.
Policyholders affected by these rate adjustments will see the changes reflected in their individual premiums upon the next renewal following the effective date.
In related news, on February 11, the California Department of Insurance announced that the California FAIR Plan requires an additional $1 billion to cover claims related to the Los Angeles wildfires. The FAIR Plan provides insurance to homeowners unable to secure private coverage due to high-risk properties.
The FAIR Plan, funded by major private insurers, offers coverage to those who cannot obtain private insurance. While it is designed as a temporary solution, increasingly more Californians are relying on it. In 2024, the FAIR Plan had over 452,000 policies, more than double the 2020 figure.
The FAIR Plan estimates a loss of roughly $4 billion from the Eaton and Palisades Fires, which began on January 7, causing significant damage to nearly 17,000 structures and resulting in at least 29 deaths. The plan has received approximately 4,700 claims this week and has already disbursed over $914 million.
Under a plan approved by the state, all insurers operating in California will be mandated to cover half of the additional costs, with the remainder passed on to policyholders via a one-time fee. Insurers will have up to two years to collect this cost, subject to the state Insurance Department’s approval. State officials have not yet disclosed the anticipated size of this fee.
The state Insurance Department approved the plan’s request, authorizing the plan to notify and collect funds from marketplace insurers within 30 days. This marks the first time in over three decades that the FAIR Plan has sought additional funds, the department reported.
The Associated Press provided contributions to this article.
