State Farm Requests Another Rate Increase Of 11%

State Farm Insurance announced this week that they will be pursuing an additional 11% insurance rate increase, only a week following an emergency 17% rate increase for the company being approved by the California Department of Insurance (CDI).

According to the new filing from State Farm, while the 17% increase helps in the interim, a further rate increase is needed because of the heightened risk in California and that the current rates don’t cover their recent losses in the state. While unsaid, it is likely that they were referring to the January 2025 wildfires in and around Los Angeles.

“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,” said State Farm in their updated request. “As we continue to emphasize in our ongoing interim rate filing, we need immediate rate increases to help stabilize State Farm General’s financial condition. It is difficult to match price to risk in California.

“While we are pleased that Commissioner Lara approved the interim rate of 17% for State Farm General Insurance Company, this change only addressed part of the original request of 30% filed in June 2024.”

For the past few years, State Farm, like other insurance companies in California, has drastically increased insurance rates and has began limiting who they cover within the state. This has included State Farm raising auto insurance rates in March 2023, announcing that they would no longer be accepting new applications for any kind of insurance other than personal vehicle insurance in May 2023, a 20% home insurance rate increase in January 2024, removing 72,000 insurance policies in the state, roughly 2% of their total number in California, in March 2024, and a big 50% rate increase request coming in July 2024.

While the insurance situation seemed to have improved at the beginning of the year, this was upended by the wildfires in Los Angeles. Combined, the Eaton and Palisades Fires caused 30 deaths, 16,255 destroyed structures and a further 2,088 damaged structures. With so many homes and rental buildings either destroyed or damaged, insurance companies were suddenly flooded with tons of claims. No company was expecting so many claims, especially total loss claims, to come at once. This included State Farm who sought an emergency rate hike of 30%, and then lowered it to 22% and then finally 17% following an uproar. When broken down, the company seeks an increase of 22% for non-tenant homeowners, 15% for renters and condominium owners, and up to 38% for rental dwellings.

Another rate increase

The situation culminated last week when CDI Commissioner Commissioner Ricardo Lara gave a final sign off on the controversial 17% rate hike sought by the company, following a court decision okaying the rate increase. According to a statement issued by Lara, State Farm will need to secure a $400 million surplus note from its parent company to help back it’s financial situation in the state which, in turn, the company will get permission to install an emergency 17% rate increase. In addition, State Farm cannot remove any policyholders through non-renewal programs through the end of 2025.

The 11% increase requested this week by State Farm goes around the emergency hike and, if approved, would lead to a total increase by January 2026 to 28% – close to the original 30% increase sought in 2024 and well above the first reduced amount of 22%. With around 1 million homeowners covered by State Farm in California, and many more with condo and rental insurance, the rate increases would bring a dramatic financial cost to consumers.

While the wildfires and increased risk in California have been major blames, others are denouncing Prop 103 for helping cause the dramatic increases in insurance costs in the state over the past few years. Prop 103, passed by Californian voters in 1988 by a narrow 51%-49% margin, was, according to the CDI, “Intended to protect consumers from arbitrary insurance rates and practices, to encourage a competitive marketplace and to ensure that insurance is fair, available and affordable for all Californians.”

Prop 103 kept prices artificially low for the next few decades, during which time natural disaster risk went substantially up. The devastating Camp Fire in 2018, other notable wildfires in the 2010s and 2020s, a high risk of mudslides and earthquakes, and the 2025 fires all brought in a perfect storm of reasons for insurance companies to dramatically increase rates, stop picking up new policies or simply leave the state. State Farm’s request this week is simply the latest effect of the crisis.

State Farm is set to argue for the rate increase during the next CDI rate increase meeting on October 20th. Should it be approved, the additional 11% increase will become active for 2026.