State Farm Requests Emergency Rate Increase in California
State Farm General is seeking an emergency interim rate increase from California officials, citing the extensive financial impact of the January 2025 wildfires. The company revealed that the proposed rate hike could average a 22% increase for California homeowners.
In an open letter to the California Department of Insurance, State Farm General stated, “The costs of the January 2025 wildfires will further deplete capital from State Farm General. Capital is necessary so an insurance company can pay for any future claims for the risks it insures.”
Following the recent wildfires, State Farm General reported receiving over 8,700 claims as of February 1, with payouts exceeding $1 billion. The company anticipates “significantly” higher payouts.
State Farm also issued a stark warning to its California customers: “Insurance will cost more for customers in California going forward because the risk is greater in California.”
The California Department of Insurance has expressed concerns regarding State Farm’s rate filings, stating that they raise “serious questions” about the company’s financial situation. The department noted that it plans to “respond with urgency and transparency to recommend a course of action for Commissioner [Ricardo] Lara.”
Insurance expert Karl Susman noted that California homeowners currently pay less than those in most other states. He added that the market has not yet fully accounted for the escalating risks associated with climate change and wildfires. Susman stated, “[State Farm is] telling the Department of Insurance, ‘hey, it’s time. We need to start bringing rates more in line with what the actual risks are here in Southern California in order for us to stay viable in California.'” He further stated that increased insurance prices are inevitable due to the growing risks.
In its letter to the state, State Farm indicated that for every $1.00 collected in premiums over the past nine years, the company has spent $1.26, reflecting the gap between rates and risks. State Farm is also requesting a 15% increase for condo owners and a 38% increase for renters, slated to take effect on May 1 if approved.
For some homeowners, like Gary Gilligan of Auburn, the proposed increases are already impacting personal finances. Despite a firewise community discount, Gilligan’s policy renewal resulted in a significant increase. His premium jumped from $3,217 to $5,211.50, an 87% increase. “Well, we were planning a trip to Disneyland for my birthday, I’m turning 60, so we ended up canceling that,” Gilligan said, “because we have to pay this extra $2,000 and we don’t have that money right now.”
