State Farm's CA rate increase gets provisional approval, pending public hearing

California's Insurance Commissioner issued an order provisionally on Friday approving State Farm's emergency request to raise home insurance rates by about 22% so long as the company appears at a public hearing next month and justifies why those rate increases are necessary.

The state has been weighing this emergency request to raise rates by the state's largest home insurer since early February. State Farm General Insurance Company, the insurance giant's California branch, has said these rate increases are necessary to help avoid a "dire" financial situation. The company said its financial position in California was already deteriorating prior to the significant fires in LA County this January, but it reports that those fires compounded its difficulties with an estimated 7.6 billion in losses.

State Farm, which saw a 20% rate increase for customers last March, has been asking for more rate increases since June of 2024. Those negotiations have happened in a back-and-forth between State Farm, the state Department of Insurance, and Consumer Watchdog -- the third-party intervenor in this case. While transcripts have been published from several of those recent conversations, the call to bring State Farm to a public hearing marks a new point in this insurance battle, where those conversations will be in the public eye and also in front of an administrative law judge.

If approved, these rates would go into effect on June 1 and include a nearly 22% increase for homeowners, a 15% increase for renters, a 15% increase for condominiums, and a 38% increase for rental dwellings.

In an interview with NBC Bay Area on Friday, Commissioner Ricardo Lara said State Farm hasn't shared all the evidence he needs yet.

"I know they have been losing money, but they haven’t been -- I would say-- honest with us in terms of ‘what are you doing to put your financial health in order,"’ Lara said.

He explained that he has told State Farm, '"We have given you rate increases, again, the department has been working with you all, you have been cherry-picking the less [risky] homes.'"

"And they’ve also told me that rate hikes alone are not going to get them through their financial issues, so what really is happening, what is going on?" Lara continued.

Lara said that in the April hearing, the administrative law judge will hear State Farm's case, and then will offer him a recommendation.

"I look forward to reviewing that recommendation," he said.

Lara and others at the Department of Insurance had a meeting with State Farm executives and Consumer Watchdog representatives in Oakland in February and then again on March 11 via video conference.

State Farm General insures about 20% of California's homeowners. The company responded to Lara's statement Friday saying in part, “It’s time for certainty in the California insurance market for our customers. The provisional nature of today’s decision does not improve that certainty but it’s a step in the right direction."

In 2023, State Farm stopped writing new policies in California, citing high losses and growing risk. Those are issues the entire insurance industry has struggled with in the Golden State.

Now we have these devastating fires at the beginning of 2025," noted Janet Ruiz, with the Insurance Information Institute, an industry association to which State Farm belongs

"So if an insurance company was struggling, that means they do need to ask for more rates a little faster,” Ruiz continued.

Ruiz also noted that after an insurance rate increase is approved, consumers typically don't see the impacts on their policy for twelve to eighteen months. Also, Ruiz acknowledged California's Department of Insurance is working with the insurance industry to stabilize the insurance market.

Consumer Watchdog, the nonprofit that is the third-party opponent to State Farm's rate increase, doesn't think that State Farm has done enough to prove the financial hardship it's claiming.

"That kind of financial infusion should come from the parent company, or other sources, not California consumers," said Carmen Balber, the Executive Director of Consumer Watchdog.

Consumer Watchdog, which has been pushing for this matter to go to a public hearing, is encouraged to hear the April meeting has been scheduled.

"This is a win for consumers because State Farm’s request will be adjudicated in the light of day," Balber said.

In the meeting between all three parties on March 11, Commissioner Lara said that along with the interim rate approval, he would like State Farm to agree to pause any California non-renewals or cancellations through 2025. He also said that he would like for State Farm General to seek $500 million from its parent company, State Farm Mutual, to strengthen its financial position.

Amy Bach, the executive director at the San Francisco-based nonprofit United Policyholders, noted that regardless of what happens with this particular rate increase, the insurance market will continue to be difficult for California policyholders.

"State Farm customers can expect that their rates are going to continue to go up for the foreseeable future, but understanding that -- always -- these rate increases get spread around, and really it depends where you live," Bach said.

Bach, who advocates for policyholders, said of Lara's order on Friday, "The pressure is intense, and the stakes are very high, and I think this is a good approach that he’s taking to have a hearing with the administrative law judge."

"The only piece I am hoping to see that I didn’t see in the announcement was a commitment by State Farm to stop the non-renewals," said Bach.

Some policyholders say they're not encouraged to hear this news about a potential State Farm rate increase.

"I think the rate increase is ridiculous," said Michael Van Every in San Jose.

Van Every said that his policy with State Farm was dropped two years ago, and he had to go to the FAIR Plan (California's insurer of last resort) to get coverage.

"The insurance commissioner needs to do a better job, and that's not 22% increases," Van Every said.

Chris Bertrand, who currently has a policy with State Farm, said he will be paying closer attention to his premium now that he knows a rate increase could be on the horizon.

"It's getting difficult to find insurance, but it is still a free market, so I guess if I'm not a happy customer with State Farm, I'll have to shop somewhere else," Bertrand said.

The public hearing is scheduled for 10 a.m. on April 8 in Oakland.