(Airdate: 2024-07-04) CBS - KFMB - State Farm wants 30% increase in homeowners rates in California

Published Date: 07/04/2024

State Farm Requests Major Rate Hike: What California Homeowners Need to Know About the 30% Increase Proposal

For millions of Californians, the fireworks of Independence Day came with a dose of unsettling financial news: State Farm, the state’s largest homeowners insurer, has filed for yet another significant rate increase — 30% for homeowners, 36% for condo owners, and a staggering 52% for renters insurance.

As CBS 8 San Diego reported, this latest filing represents one of the most dramatic proposed hikes in recent memory. It’s the latest development in California’s ongoing insurance crisis — one that has already seen major insurers halt new policies, drop long-time customers, and cite rising costs, wildfire exposure, and outdated regulations as reasons for their retreat.

“I hate to be the bearer of bad news on the Fourth of July weekend,” said the CBS 8 anchor. “But State Farm is asking for another rate increase.”

The news may have dampened the holiday for thousands of families already struggling with affordability. But before panic sets in, experts emphasize that nothing changes yet — and that the increase is not yet approved.

1. The Details: How Big Are the Proposed Hikes?

Here’s what State Farm’s new filing includes:

• +30% for homeowners insurance
• +36% for condo owners
• +52% for renters insurance

If approved, these increases would affect millions of California policyholders — and come on top of previous rate adjustments State Farm received earlier this year.

The company’s request must first go through the California Department of Insurance (CDI) review process, which can take several months. Until then, policyholders’ premiums remain unchanged.

“It’s critical to understand that nothing changes today for State Farm policyholders,” said Michael Soller, spokesperson for the Department of Insurance.

2. Why State Farm Says It Needs Another Increase

In an emailed statement to CBS 8, State Farm said its rate filing was necessary to cover the increased cost of doing business in California — especially after years of heavy wildfire losses, inflation, and higher reinsurance premiums.

“Rate changes are driven by increased costs and risk,” the company said, “and are necessary for State Farm General to deliver on the promises the company makes every day to its customers.”

The insurer is invoking a rarely used section of California’s insurance law that allows companies to request rate changes based on financial solvency — essentially arguing that without these hikes, its ability to pay future claims could be at risk.

“The rate filing that State Farm just made — they’re triggering a rarely used part of the insurance law,” Soller explained. “It’s a regulation that’s really meant to address a company’s financial solvency.”

That move signals that State Farm sees this as an urgent situation — not just a routine adjustment.

3. The State’s Response: Scrutiny and Skepticism

The California Department of Insurance has made it clear that this proposal won’t be rubber-stamped.

“We have some serious questions about State Farm’s financial condition,” Soller said. “And we’re going to get to the bottom of it.”

This is a strong statement from a regulatory agency that’s been walking a fine line between protecting consumers and keeping insurers in the state.

Earlier this year, the Department already approved smaller rate increases for several carriers while also advancing Commissioner Ricardo Lara’s Sustainable Insurance Strategy, which includes allowing forward-looking catastrophe modeling and faster rate approvals to modernize California’s outdated system.

However, a 30% hike — especially from the state’s largest carrier — is bound to reignite public debate about affordability and fairness.

4. A Pattern of Retrenchment

State Farm’s request doesn’t exist in isolation. It follows a series of moves that have gradually reduced the company’s footprint in California:

• May 2023: State Farm stops accepting new homeowners insurance applications statewide.
• March 2024: The company announces it will not renew 30,000 existing homeowners policies.
• July 2024: It files for a 30% rate increase, citing rising costs and risk exposure.

“State Farm has already stopped writing new homeowners policies in California,” CBS 8 reported. “And earlier this year announced they would not renew 30,000 homeowners policies statewide.”

These steps have deepened anxiety among homeowners and raised concerns about whether California’s insurance market is on the verge of collapse.

5. Why This Matters for Every California Homeowner

Even if you’re not insured by State Farm, this filing matters.

As the largest home insurer in the state, State Farm’s actions often set the tone for the broader market. Other companies — like Allstate, Farmers, and Liberty Mutual — often follow its lead, citing similar cost pressures.

If State Farm’s increase is approved, other insurers could quickly file their own rate requests, leading to a cascading effect that impacts the entire state.

Moreover, if regulators deny the request without offering alternative reforms, companies could respond by further restricting coverage — forcing more Californians onto the California FAIR Plan, the state’s last-resort insurer.

6. Expert Advice: What Homeowners Can Do Right Now

Insurance expert and broker Karl Susman offered some practical advice for policyholders facing uncertainty.

“Current State Farm policyholders do not really have any options right now,” he said.

Still, he suggests homeowners start by talking to their agents.

“Start out with the question,” Susman advised. “Say, what is the maximum deductible that you offer?”

Increasing your deductible can lower your premium — sometimes substantially — though it means paying more out of pocket if you file a claim.

“If that doesn’t help enough to be worthwhile,” he added, “you know to move on to something else. Maybe it’s the coverage for personal property or additional features you can adjust.”

In short: Review your policy line by line. Identify what’s essential and where you might safely trim.

7. Understanding “Financial Solvency” Filings

The mention of a “rarely used” solvency regulation in State Farm’s filing is especially significant.

California law allows insurers to request special rate adjustments if they can demonstrate that current rates threaten their financial stability. These requests are uncommon — and they attract heightened scrutiny from regulators.

For context, State Farm’s national organization remains financially strong, but each state branch (like State Farm General Insurance Company in California) is evaluated independently.

If the California branch is showing losses due to local wildfire exposure and reinsurance costs, it could technically trigger a solvency-based rate request.

“That’s what they’re saying,” Soller explained. “And we’re going to look closely at that.”

The Department of Insurance will now review the filing’s financial data, loss ratios, and justifications before deciding whether the increase is warranted.

8. The Broader Context: A System Under Pressure

California’s insurance system — shaped by Proposition 103 (1988) — requires regulators to approve rate changes and bars companies from using forward-looking risk models.

This system was designed to protect consumers, but critics argue that it has left insurers unable to respond to rapidly changing climate conditions.

Governor Gavin Newsom and Commissioner Lara have been working on reforms to modernize the system, including a 120-day rate review limit and permission to use catastrophe modeling in exchange for commitments to serve high-risk areas.

However, as this latest filing shows, reforms can’t come fast enough to prevent instability.

“It’s a horrible situation right now,” Susman said in a previous interview. “We’re going to have to be a little more patient.”

9. What Comes Next

The Department of Insurance will now:

1. Review State Farm’s financial and actuarial data.
2. Hold public hearings if necessary.
3. Approve, deny, or modify the requested rates.

That process could take several months — possibly extending into early 2025.

Meanwhile, no rate changes will take effect until the Department reaches a decision.

“It could take months,” CBS 8 reported. “It’s critical to understand that nothing changes today.”

10. The Bottom Line

State Farm’s proposed 30% increase underscores just how fragile California’s insurance ecosystem has become.

For regulators, it’s a test of how to balance market solvency with consumer protection.
For insurers, it’s a plea for flexibility in the face of rising risk.
And for homeowners, it’s another reminder that the crisis is far from over.

While the Department of Insurance scrutinizes State Farm’s financial claims, policyholders should stay informed, talk to their agents, and review their coverage options.

If the request is approved, rates will rise — but if it’s denied, the market could tighten even further.

Either way, California’s path forward depends on finding a middle ground: one where insurers can stay in business, and homeowners can still afford to protect theirs.