Judge Approves State Farm California’s 17% Rate Increase

After the wildfires that swept through LA neighborhoods of Altadena and Pacific Palisades, State Farm (California’s top home insurer) requested an emergency rate hike of 22%. They didn’t get that but yesterday a judge did approve a 17% hike.

Administrative Law Judge Karl Frederic Seligman, who oversaw an unusual three-day hearing on the matter last month, said that California’s largest insurer was already in a weakened financial state at the time of the fires and that the emergency rate hike would carry it over as the state considers other rate hikes requested last year.

“The proposed interim rate stipulation serves the best interests of California consumers and the public. Taken as a whole, it represents a fundamentally fair, adequate and necessary measure — effectively functioning as a rescue mission to stabilize State Farm’s financial condition while safeguarding policyholders,” he wrote in a decision released Tuesday.

The hike was approved by Judge Seligman yesterday and today the state insurance commissioner also approved it.

California Insurance Commissioner Ricardo Lara approved an emergency rate hike request by State Farm that will allow the company to increase premiums on homeowners, renters and landlords…

“Let me be clear: We are in a statewide insurance crisis affecting millions of Californians,” Lara said. “Taking this on requires tough decisions. This is not a game. This is not a media-driven moment for some to exploit — this impacts people I am committed to protecting.”

The new rate hike follows a 20% rate hike for State Farm that went into effect in March 2024. These rate increases have been approved because insurers have a trump card to play: They can simply pack up and leave the state. Several insurers have done that over the past couple years. State Farm never went that far but it did stop taking new insurance customers for a time back in 2023.

State Farm had initially requested a 22% increase but homeowners fought that, led by people who had lost their homes in the wildfires but were struggling to get insurance payouts from State Farm.

During the recent hearing in California and in the process that ensued, State Farm was forced to make some concessions — lowering the rate hike to 17 percent, from nearly 22 percent, as well as requiring State Farm’s parent company to provide an infusion of $400 million in cash to its California affiliate…

The higher rate comes after survivors of the Eaton fire in the working-class community of Altadena organized, first on a WhatsApp group dedicated to pickleball and later on Discord, a platform better known for gaming.

There they found each other and collected hundreds of firsthand accounts of homeowners insured with State Farm in California, who were struggling to get paid  even when their homes had been leveled, said Joy Chen, a former deputy mayor of Los Angeles and the leader of the group, now known as the Eaton Fire Survivors Network.

In theory, this rate hike could still be revised after the fact. If a later hearing decides State Farm charged too much, customers could receive rebates.

The Department of Insurance will continue to study the necessity of the rate increase. A full hearing is expected no earlier than October 2025.

“State Farm must now justify its financial condition and detail its recovery plan in a full rate hearing before a neutral judge and my Department’s experts,” Lara said in a statement.

For now, this hike only impacts State Farm customers in California. The rate hikes should take effect next month. But once other insurers see this they are likely to seek their own rate hikes. So the cost of insurance will continue to climb rapidly in California.