In a contentious decision that underscores the ongoing volatility of California’s home insurance market, Insurance Commissioner Ricardo Lara has formally approved a 17% emergency increase in homeowner premiums for State Farm General Insurance, the state's largest property insurer.
The rate hike, which takes effect June 1, follows a recommendation issued earlier the same day by Administrative Law Judge Karl Frederic Seligman. The judge concluded that the increase was a necessary stopgap measure to stabilize the company’s deteriorating finances after January’s destructive wildfires swept through the Los Angeles area.
“This action is just the beginning,” Lara said Tuesday, emphasizing that State Farm will still face a comprehensive rate hearing later this year. “The company must explain its financial situation in full and present a recovery plan before any long-term adjustments are made.”
The commissioner’s decision also authorizes increases of 15% for renters and condo insurance policies and 38% for landlord coverage — all on an interim basis while a broader evaluation of State Farm’s rate proposals is underway.
State Farm’s financial condition has raised alarm bells at the Department of Insurance for more than a year. The company’s surplus declined by over $1.2 billion between 2022 and 2024, according to Seligman’s ruling, and now stands at approximately $620 million following payouts for wildfire claims. State Farm has said it expects to ultimately pay out $7.6 billion in losses from the fires, although much of that will be offset by reinsurance support from its parent company.
In a statement, State Farm acknowledged the approval as “a critical first step” but said that its long-term stability still depends on rebuilding capital reserves. The company has also agreed to suspend widespread non-renewals of residential policies — a practice that has drawn sharp criticism from lawmakers and consumer advocates. Last year, it announced plans to drop more than 70,000 policies, escalating fears of market contraction.
To shore up the company’s finances, Lara has stipulated that State Farm must immediately receive a $400 million infusion from State Farm Mutual Automobile Insurance Co., its parent entity.
Despite assurances of oversight, Lara’s move has sparked intense backlash from residents and elected officials in fire-stricken communities. Many homeowners accuse the company of dragging its feet on claim payments and issuing lowball settlements.
“We are deeply disappointed,” said Joy Chen, a representative of the Eaton Fire Survivors Network, who criticized the commissioner for approving the rate increase without completing an investigation into alleged misconduct. “This decision leaves thousands of families feeling abandoned.”
State Senator Sasha Renée Pérez, whose district includes areas ravaged by the Eaton Fire, echoed that sentiment. “For regulators to greenlight a premium hike without resolving the complaints pouring in from my constituents is both premature and unjust,” she said in an interview.
Consumer Watchdog, a nonprofit advocacy group, has also condemned the move, calling it a violation of California’s Proposition 103, which requires that insurers fully justify any rate increase before implementation. “The public deserves transparency,” said Carmen Balber, the group’s executive director. “Refunds after the fact do little for homeowners who are already struggling.”
The decision reflects the delicate balance regulators must maintain amid California’s worsening climate risks and insurance market turmoil. Several national carriers have scaled back operations in the state, citing mounting wildfire exposure and regulatory uncertainty. State Farm has suspended new homeowner policies and warned that further withdrawals could follow if its rates are not adjusted to reflect growing risks.
While the emergency rate hike may help avert an immediate retreat by the insurer, questions remain about the long-term sustainability of property insurance in fire-prone regions. Lara has pledged that his department will continue to evaluate market conditions and hold insurers accountable — but for many residents, the damage may already be done.
“It’s not just about rates,” said Pérez. “It’s about trust — and right now, that trust has been severely eroded.”
