State Farm can raise homeowners, renters, condo, and landlord policy insurance rates in California — at least until April 8, when the state’s largest property insurer must prove in a public hearing that it really needs the increase.

If it fails to make its case on that day, it will have to repay policyholders for the higher rates, plus interest. Under an agreement with California Insurance Commissioner Ricardo Lara, State Farm will also have to pause non-renewals and seek a stabilizing infusion of $500 million from its parent company.

State Farm’s emergency rate request

State Farm requested a 22% home insurance rate increase in response to damage stemming from wildfires that scorched through Los Angeles communities in January. The insurer argued the increase was necessary to keep State Farm solvent.

California Insurance Commissioner Ricardo Lara initially rejected the emergency rate increase, saying the insurer had “not met its burden” to demonstrate why it needed emergency relief.

But in an informal Feb. 26 meeting with State Farm and consumer advocates, Lara said he’d be willing to grant an interim increase pending a full public hearing. In return, the insurer would need to agree to halt non-renewals and ask its parent company, State Farm Mutual, for funding.

“Look, I understand this is a significant request, one that I don’t make lightly, either because you know, again, our consumers are going to have another rate increase,” Lara said in the meeting. “… We need to see that State Farm is willing to also put some skin in the game.”

Impact of State Farm’s financial woes on Californians

State Farm’s rate request is the insurer’s latest effort to navigate the challenging California insurance market.

State Farm stopped writing new home policies in California in May 2023. In March 2024, the insurer announced it would not renew 30,000 homeowners policies and 42,000 landlord policies. In July 2024, State Farm sought a 30% rate increase for California home insurance policies and a 38% increase for renters policies.

Under the interim deal between Lara and State Farm, the insurer can increase homeowners rates by 22%, renters rates by 15%, and landlord policy rates by 38%. But it must pause non-renewals throughout California, not just in the L.A. area, Lara ordered.

“Currently, too many Californians live in fear of having their insurance policies non-renewed,” Lara said in a press release announcing the interim approval. “This anxiety perpetuates misinformation and discourages consumers from accessing their entitled benefits. This situation is unacceptable.”

What’s next: A deciding hearing

State Farm’s rate hearing will take place April 8, authorized under California’s Proposition 103 insurance regulation. Such hearings are extremely rare. The last one occurred in 2015 and also involved State Farm.

“We will finally get to the bottom of State Farm’s financial condition,” Lara said. “I am confident that my approach will provide Californians with greater choices in a competitive and stable insurance market — exactly what they deserve.”

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