“In the middle of this insurance crisis, we want to make sure that companies continue to do business in California, and that more companies actually come back,” Michael Soller, a spokesperson at the California Department of Insurance, told KQED.

California’s agreement with State Farm comes with some stipulations: an infusion of $400 million from its parent company, a halt to large-scale non-renewals until the end of 2025, and the possibility that customers could receive a refund with interest if further review reveals that this price hike isn’t necessary.

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.

The company first requested to significantly raise rates in June 2024 to prevent insolvency. Those rate requests, which sought an average 30% increase in homeowners insurance and a 52% increase in renters insurance, were not approved before the L.A. fires saddled the company with enormous payouts.

Then, in February, State Farm went back to the state and requested an emergency rate hike to go into effect by May 1 to avoid a “dire situation for our customers and the insurance market in the state.” While the company would be able to pay claims related to the L.A. fires, State Farm said, it might not be able to pay claims stemming from future fires.

State Farm’s February request sought an average increase of:

• 22% for homeowners’ insurance
• 15% for renters’ or condominium tenants’ insurance
• 38% for rental dwelling insurance

Regulators approved:

• 17% for homeowners
• 15% for renter/condo
• 38% for rental dwelling

The changes will go into effect on June 1. Some policyholders will pay more, some will pay less, depending on what State Farm thinks their individual risk is for wildfire and other dangers.

The rate increase is sure to be painful for Californians already struggling to afford housing. Insurance markets have been rocked in recent years, particularly by the increase in climate-driven disasters and what many insurance experts characterize as a state that has waited too long to update insurance regulations.

State Farm received a heavy dose of criticism from some L.A. fire survivors, who accuse the company of slow-walking or denying claims they should pay. And the stipulation that the company halt large-scale non-renewals comes after 70% of State Farm policyholders in Pacific Palisades found themselves scrambling for new coverage last summer, just months before the westside L.A. neighborhood burned.