State Farm Seeks 22% Home Insurance Rate Increase After Wildfires

State Farm Insurance announced on Monday that they have asked the California Department of Insurance to approve an emergency interim rate increase for rental homes, non-rental homes, rental units, and condos to help pay for the massive increase of claims filed in the state following the Southern California wildfires last month.

For over two years, insurance companies have been limiting policies, ending new policies, or generally reducing their presence in the state. In 2022, GEICO closed down all 38 of their offices in the state, with State Farm raising auto insurance rates in March of 2023. However, the largest action came in May 2023 when State Farm Insurance announced that they would no longer be accepting new applications for any kind of insurance other than personal vehicle insurance because of large increases in construction costs and inflation. About a week later, it was revealed that Allstate did the same thing, stopping all new homeowners insurance policies for the last several months. Later in the year, Farmers announced new limits on the number of new homeowner insurance policies it will give each month, with numerous other insurance companies, like Liberty Mutual, no longer offering certain policies in the state.

In August 2023, Farmer’s announced 2,400 layoffs, with nearly all companies raising rates by at least 20% in late 2023 and early 2024, including State Farm. For the companies, the reasons were simple: large increases in construction and reconstruction costs, a rise in crime, inflation, and a largely increased risk of danger because of more wildfires. In March 2024, State Farm also made the drastic decision to remove 72,000 insurance policies in the state, roughly 2% of their total number in California. Two months later, both the Tokio Marine America Insurance Company and the Trans Pacific Insurance Company announced they would be pulling completely out of California, ending over 10,000 home and umbrella insurance policies. Finally, more home insurance rate increases were announced later in 2024, including 15% for Travelers, 34% for Allstate, and up to 50% for State Farm.

However, going into 2025, things began to stabilize in the industry, with some insurance companies, like Farmers, actually announcing an increase in the number of news homeowner and rental policies. But that changed following the wildfires in Los Angeles. Combined, the Eaton and Palisades Fires caused 29 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.

Faced with staggering payouts, State Farm announced on Monday that they are asking the Department of Insurance to approve an emergency rate hike for all home owners and renters. According to the company, they are asking for an increase of 22% for non-tenant homeowners, 15% for renters and condominium owners, and up to 38% for rental dwellings. Doing so would help avert “a dire situation” in the state. In addition, the company said that over 8,700 fire claims have been filed so far, with over $1 billion paid out by February 1st. They also said the fires will likely go down as the costliest disaster in company history.

An urgent request from State Farm

“The costs of the January 2025 wildfires will further deplete capital from State Farm General,” State Farm said Monday. “Capital is necessary so an insurance company can pay for any future claims for the risks it insures. Last year, one rating agency downgraded State Farm General’s financial strength rating due to its capital position. With further capital deterioration as a result of the wildfires, additional downgrades could follow. If that were to happen, customers with a mortgage might not be able to use State Farm General insurance on the collateral backing for their mortgage.

“State Farm General asked the California Department of Insurance today to immediately approve interim rate increases to help avert a dire situation for the more than 2.8 million policies issued by State Farm General, including 1 million State Farm General homeowners customers, and the insurance market in the state of California. State Farm General has had an outstanding filed rate increase pending since June 2024. Pending CDI approval, rate changes will be effective upon renewal on or after May 1, 2025.

“Insurance will cost more for customers in California going forward because the risk is greater in California. Immediate emergency interim approval of additional rate is essential to more closely align cost and risk and enable State Farm General to rebuild capital. We must appropriately match price to risk. That is foundational to how insurance works. Higher risks should pay more for insurance than lower risks. Over the last 9 years, the lack of alignment between price and risk means that for every $1.00 collected in premium, State Farm General has spent $1.26, resulting in over $5 billion in cumulative underwriting losses.

“State Farm General still insures high concentrations of risk in California that could generate financial losses multiple times larger than the company’s surplus. A smaller capital base will further constrain State Farm General’s ability to provide coverage. Reinsurance will assist us in paying what we owe to customers. We look forward to working alongside regulators, policymakers and industry leaders on creating a sustainable insurance environment in California – one that balances risk and increased rates, ensures long-term market stability and keeps insurers like State Farm General a vital part of California’s future.”

The California Department of Insurance has yet to make a decision on the request as of Tuesday afternoon. However, the did say in a statement that they are looking into it and are worried about State Farm’s financial situation.

“State Farm General’s rate filings raise serious questions about its financial condition,” explained CDI spokesman Gabriel Sanchez on Tuesday. “To protect millions of California consumers and the integrity of our residential property insurance market, the department will respond with urgency and transparency.”

And, according to those in the industry, State Farm might not be the only company to increase rates as a result of the massive increase in wildfire claims.

“California had only one thing to do in 2025 to help get the insurance situation back on track, and that was to avoid any huge disasters,” explained Trevor Connery, a lobbyist who has worked for insurance companies in the past, to the Globe on Tuesday. “They didn’t make it a week.

“State Farm is, as difficult as it is to accept, justified in asking for this increase. They’re the most prevalent insurance company here in California and these fires have been gutting them. And this puts the state between a rock and a hard place. Don’t accept, and State Farm may pull out of California to some extent, which could leave so many residents high and dry. Or if they accept the increases, that means Californians with them as their insurance company now face an even larger financial burden at a time where many are barely making ends meet. Let’s not forget State Farm has increased rates in California pretty dramatically in the last few years too. People with them as insurers don’t want to see those numbers go up.

“And if State Farm is doing this, you can bet other companies will follow suit. Especially if the Department of Insurance approves it. The fires wrecked everything for everybody. And now, for many Californians, having to pay even more for home insurance is a major possibility.”