CA approves State Farm's emergency rate hike; increases as high as 38% start June 1

SAN FRANCISCO (KGO) -- Starting next month, millions of Californians will see a sharp rise in their property insurance premiums as State Farm got the official green light from the state's insurance commissioner.

The following rate hikes will go into effect June 1:

• 17% increase for homeowners


• 15% increase for condos and renters


• Up to 38% increase for rental dwellings

The ruling comes five weeks after the company's April 8 hearing in Oakland, where State Farm's actuary testified, they did not do the formal calculations required by law to substantiate increases as high as 17 percent were necessary.

Yet, the administrative judge still signed off. He works under the California Department of Insurance (CDI) and Commissioner Ricardo Lara, who had already provisionally approved the request.

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"It's a huge disappointment for consumers that the judge has suggested consumers should pay now but allow State Farm to wait months before proving their rate hike," said Carmen Balber, the Executive Director of Consumer Watchdog. "That's what we're seeing with this decision today."

State law requires insurance companies to justify increases before they take effect. But that didn't happen here. Instead, the interim increase will go into effect on June 1. CDI plans to hold another hearing to justify State Farm's increase in October. That could be good or even worse for consumers.

"That's what's really in the future for consumers - the potential for a rollback in refunds or an even higher rate increase in October," Balber said.

The financial anxiety

"We sleep at night wondering how we're going to make this," said Mariane Directo, a longtime customer of State Farm.

In her 30 years with the company, Directo's first and only claim filed was denied.

"We even had an outside inspection refute the denial. And they wouldn't let us appeal," she said. "I want to get out of State Farm completely... I don't trust them anymore!"

This will be State Farm's second rate hike since March 2024.

It's forcing her to sell her family heirlooms.

"I had some gold jewelry that was passed down from my mother which meant a lot to me, it breaks my heart... I had to sell it all to make those payments," Directo said.

Concerns from LA fire victims

The decision is financially devastating to families, especially in LA County, who are struggling to get State Farm to pay out wildfire claims.

"State Farm has, according to Ricardo Lara, been the #1 worst insurer when it comes to actually fulfilling contract obligations," said Joy Chen, a former deputy Mayor of LA now leading the Eaton Fire Survivors Network.

The group sent a letter asking the Commissioner to investigate State Farm, including nearly 400 personal messages from survivors raising alarm about the company's practices.

"In spite of all this evidence, all these accounts of State Farm failing to fulfill its obligations, he's gone ahead to reward them...instead of investigating them," said Chen. "So we're disappointed this is the guy that we elected!"

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Meanwhile, in response to the decision, Lara wrote: "I expect State Farm to provide the highest level of service to its California customers and to fulfill its promises. 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. I am focused on ensuring that State Farm pays its claims to wildfire survivors fully and fairly - and nothing is off the table."

As for the rest of us?

"This could set a very dangerous precedent if it stands for other insurance companies," Carmen Balber said. "If State Farm can get a rate hike before justifying it, what's to stop the rest of the insurance industry from seeking the same concessions?"

State Farm responds

State Farm says it's paid more than $3.51 billion to customers in the wake of the LA Fires.

The company applauded the decision writing, "We thank the Administrative Law Judge for his careful consideration of this important matter. Today's emergency interim rate approval by the Commissioner is a critical first step for State Farm General's (SFG) ability to continue serving our California customers. SFG still must continue building sufficient capital for the future.

With this interim rate approval, SFG will obtain from its parent company, State Farm Mutual (SFM), an advance of $400 million under a surplus note to be issued by SFG, subject to regulatory approval. SFG would be obligated to repay the surplus note balance plus interest over time, subject to certain conditions, because customers outside California should not be expected to pay for risks in California. SFG, to improve its financial condition, will continue to pursue a permanent rate adjustment in an upcoming rate hearing.

SFG will continue to evaluate its business as conditions change and is pausing new group non-renewals throughout 2025 for non-tenant homeowners; tenants - renters; tenants - condominium unit owners; and rental dwelling properties.

We remain focused on helping our customers recover from the wildfires. As of May 12, we have already paid more than $3.51 billion and are handling more than 12,692 claims.

We thank the Commissioner for this approval and look forward to continuing to work with the Commissioner and others on a more sustainable insurance market in California."