California Insurance Commissioner Rejects State Farm’s Emergency Rate Hike Request Amid Growing Insurance Crisis

California Insurance Commissioner Ricardo Lara has denied State Farm’s request for emergency rate increases on home insurance policies, creating a potential confrontation with the state’s largest insurer. This decision goes against his own staff’s recommendations and comes at a crucial time for California’s insurance market.

State Farm had sought to implement average rate increases of 22% for homeowners, citing $1 billion in claims already paid from recent Los Angeles County fires. The company, which maintains nearly 3 million policies in California including 1 million homeowner policies, wanted these premium increases to take effect in May. This request follows previous rate hikes of 6.9% in both 2022 and 2023, and 20% in 2024.

Instead of approving the request, Lara has called State Farm executives to appear at an “informal conference” in Oakland on February 26. He is seeking detailed explanations about changes in the company’s financial situation since their last request in summer, alternative measures they’re taking to improve their finances, and how these increases might affect their recent decisions to stop writing new policies and not renew existing ones for thousands of California customers.

“State Farm’s customers need real answers about why they are being asked to pay more and what responsibility the company’s leadership is taking to get its financial house in order.”

Ricardo Lara, California Insurance Commissioner, in a letter denying State Farm’s request for “emergency” rate increases on home insurance policies

This development occurs within a broader crisis in California’s property insurance market, where homeowners are struggling with both availability and affordability. Many insurance companies have withdrawn from the market, citing wildfire risks and inflation. This has forced many property owners to rely on the FAIR Plan, a state-mandated insurance pool that recently required a $1 billion lifeline to continue operations after the Los Angeles fires.

The commissioner’s decision reflects his stated priority to protect California consumers while balancing the need to maintain a viable insurance market in the state. Consumer Watchdog had opposed State Farm’s request, arguing that the company was misleading policyholders about its financial condition.

CalMatters contributed to this report