State Farm seeks major rate hikes for California homeowners and renters (2024)

State Farm General is seeking to dramatically increase residential insurance rates for millions of Californians, a move that would deepen the state’s ongoing crisis over housing coverage.

In two filings with the state’s Department of Insurance on Thursday signaling financial trouble for the insurance giant, State Farm disclosed it is seeking a 30% rate increase for homeowners, a 36% increase for condo owners and a 52% increase for renters.

“State Farm General’s latest rate filings raise serious questions about its financial condition,” Ricardo Lara, California’s insurance commissioner, said in a statement. “This has the potential to affect millions of California consumers and the integrity of our residential property insurance market.”

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California’s home insurance crisis: What went wrong, how it can be fixed and what owners can do

Major insurers have pulled back from California’s homeowners market, citing wildfires, inflation and other challenges. But there are steps at-risk homeowners can take now to secure coverage and at lower prices.

March 29, 2024

Lara noted that nothing immediately changes for policyholders as a result of the filings. He said his department would use all of its “investigatory tools to get to the bottom of State Farm’s financial situation,” including a rate hearing if necessary, before making a decision on whether to approve the requests.

That process could take months: The department is averaging 180 days for its reviews, and complex cases can take even longer, according to a department spokesperson.

The department has already approved recent State Farm requests for significant home insurance rate increases, including a 6.9% bump in January 2023 and a 20% hike that went into effect in March.

The company’s bid to sharply increase home insurance rates seeks to utilize a little-known and rarely used exception to the state’s usual insurance rate-making formula. Typically, such a move signals that an insurance provider is facing serious financial issues.

In one of the filings, State Farm General said the purpose of its request was to restore its financial condition. “If the variance is denied,” the insurer wrote, “further deterioration of surplus is anticipated.”

The insurance provider provided additional details Friday, saying it was “working toward its long-term sustainability in California.”

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“Rate changes are driven by increased costs and risk and are necessary for State Farm General to deliver on the promises the company makes every day to its customers,” the company said in a statement. “We continue to look for ways to maintain competitive rates.”

California is facing an insurance crisis as climate change and extreme weather contribute to catastrophic fires that have destroyed thousands of homes in recent years.

In March, State Farm announced that it wouldn’t renew 72,000 property owner policies statewide, joining Farmers, Allstate and other companies in either not writing or limiting new policies, or tightening underwriting standards.

The companies blamed wildfires, inflation that raised reconstruction costs, higher prices for reinsurance they buy to boost their balance sheets and protect themselves from catastrophes, as well as outdated state regulations — claims disputed by some consumer advocates.

The lack of options has prompted thousands of Californians to purchase insurance from the FAIR Plan as a last resort. Funded by the insurers doing business in the state, the Fair Access to Insurance Requirement plan provides more limited coverage as a fallback for property owners unable to find conventional policies they can afford.

As insurers have receded from the homeowners market, lawmakers in Sacramento are scrambling to make coverage available and affordable for residents living in high-risk areas.

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Last fall, Lara announced his Sustainable Insurance Strategy, a package of executive actions designed to reform the industry.

The new regulations are expected to be in place by the end of the year and mark the biggest overhaul of industry regulations since the 1988 passage of Proposition 103, which gave an elected insurance commissioner the authority to review and reject requests for rate hikes by insurers that offer homeowners, auto and other lines of coverage.

This month the Department of Insurance issued a list of wildfire-prone ZIP Codes affected by the proposed regulations. The ZIP Codes include neighborhoods in Malibu, Beverly Hills, Topanga, Bel-Air, Beverly Glen, Duarte, Castaic and on Catalina Island.

Denni Ritter, department vice president of the American Property Casualty Insurance Assn., a trade group for insurers, said Friday that the state’s “outdated insurance regulatory framework is failing consumers.”

“Current market disruptions demonstrate the urgent need for comprehensive reforms,” she said in a statement. “Insurers remain committed to working closely with Commissioner Lara to implement his Sustainable Insurance Strategy to help restore health and access to California’s insurance market.”

Times staff writer Laurence Darmiento contributed to this report.

More to Read

  • With fires burning again, is California becoming uninsurable?

    June 20, 2024

  • State regulators identify wildfire neighborhoods targeted for insurance relief

    June 12, 2024

  • Editorial: California’s next affordable housing crisis is the rising cost of property insurance

    June 11, 2024

State Farm seeks major rate hikes for California homeowners and renters (2024)

FAQs

Is State Farm canceling homeowners policies in California? ›

Last month, State Farm issued a written statement explaining its decision to no longer write new policies for new California homes and to end coverage for about 50,000 existing California customers.

Why is State Farm charging me more? ›

Harvey Rosenfield, author of Proposition 103 and founder of Consumer Watchdog, said the rate increases are being approved when the insurers “have failed to pay their customers for windfall overcharges during the pandemic lockdown, when people dramatically reduced their driving and accidents and insurance claims dropped ...

Does State Farm offer home insurance in California? ›

State Farm announced last year it would stop accepting new home insurance applications in California due to "historic" increases in construction costs and inflation.

How much is homeowners insurance in California? ›

How much is homeowners insurance in California? The average cost of homeowners insurance in California is $1,383 per year, or roughly $115 a month, for an insurance policy with $300,000 in dwelling coverage.

Why is State Farm leaving CA? ›

“This decision was not made lightly and only after careful analysis of State Farm General's financial health, which continues to be impacted by inflation, catastrophe exposure, reinsurance costs, and the limitations of working within decades-old insurance regulations,” the company said in a statement Wednesday.

Why is State Farm dropping customers? ›

State Farm said it is dropping policies across California for financial reasons and is ending coverage in areas with wildfire hazards, among other factors.

Are State Farm rates negotiable? ›

Auto insurance prices are non-negotiable, so you can't ask your car insurance company to lower your rates. However, there are several ways to find more affordable premiums. Compare quotes from multiple insurers. Although states regulate the cost of car insurance, different companies offer varying rates.

Why is my State Farm quote so high? ›

Your annual mileage, changes in your driving record, marital status, your age, and/or moving to a different neighborhood can cause you to pay more for car insurance.

Why is State Farm losing money? ›

State Farm said in a release that its unfavorable operating results came from "continued elevated claims severity and significant catastrophe activity," for both auto and homeowners insurance.

What is the cheapest insurance in California? ›

The cheapest car insurance companies in California
  • Cheapest company for minimum coverage: Geico.
  • Cheapest company for full coverage: Progressive.
  • Cheapest company for drivers with prior incidents: Geico.
  • Cheapest company for young drivers: Travelers and Geico.

Who still insures homes in California? ›

6 Best Homeowners Insurance Companies in California
  • Hippo: Our pick for fast quotes.
  • Farmers: Our pick for customizable coverage.
  • Progressive: Our pick for bundling.
  • Liberty Mutual: Our pick for discounts.
  • Nationwide: Our pick for inclusive standard coverage.
  • USAA: Our pick for club members.
Jun 28, 2024

What is the cheapest state for home insurance? ›

The average home insurance cost by state varies with the nationwide average coming in at $2,601 a year. The cheapest state for home insurance is Hawaii at $613 a year, and the most expensive state is Oklahoma at $5,858 a year.

Which homeowners insurance company has the highest customer satisfaction? ›

The best home insurance companies at a glance
Best home insurance categoryCompany winner
Best for consumer satisfactionAmica
Best coverageAndover Companies
Best for high-value homesChubb
Best for using an agentCountry Financial
2 more rows
6 days ago

Which home insurance is best? ›

Best home insurance July 2024
  • Budget Direct - Home & Contents Insurance.
  • Australia Post Home & Contents Insurance.
  • QBE Home and Contents Insurance.
  • Honey Home and Contents Insurance.
  • Youi Home and Contents Insurance.
  • RAC Home & Contents Insurance.
  • RACQ Home & Contents Insurance.
7 days ago

Is AAA writing homeowners insurance in CA? ›

AAA offers multi-policy discounts in California that make it easy to save. Enjoy the convenience of bundling your AAA Home and Auto Insurance and save 12.7 percent or more on companion car insurance, for example.

What areas is State Farm dropping in California? ›

California ZIP codes where State Farm policies will be non-renewed
ZIP codeCountyNon-renewed policies
95033Santa Clara, Santa Cruz1,035
94549Contra Costa956
95409Sonoma758
90210Los Angeles698
11 more rows
Apr 11, 2024

Why is State Farm cancelling my policy? ›

The companies have cited high inflation, catastrophe exposure, reinsurance costs and the limitation of decades-old insurance regulations as reasons for scaling back policies in the state. State Farm reported a net loss of $6.3 billion in 2023 compared to a net loss of $6.7 billion in 2022.

What insurance companies are leaving California? ›

Tokio Marine and Trans Pacific join State Farm and Allstate in discontinuing coverage for California residents.

Can an insurance company cancel your policy in California? ›

Insurers can cancel your policy if you do not pay your premium. However, you have a 30 day grace period before insurers can cancel your policy.

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