California’s homeowners insurance crisis has entered a new and more expensive phase. In early 2024, State Farm—the state’s largest property insurer—received approval from the California Department of Insurance to raise homeowners insurance rates by an average of 20%. This marked the first major increase since the company paused writing new policies in 2023 and immediately reignited debate between consumer advocates, regulators, and insurers.
FOX KTVU’s Tom Vacar examined the decision with experts on all sides, including independent insurance agent Karl Susman, to uncover what the increase really means for homeowners and for the future of California’s strained insurance market.
**The Numbers Behind the State Farm Rate Hike**
The approved increase averages 20% statewide, but the actual impact varies widely depending on location and risk exposure.
As John Baker explained in the FOX report, some homeowners may see modest increases of 2% to 5%, while others—particularly in high-risk wildfire zones—could face 50% or higher increases. Rates are driven by ZIP code–level risk factors such as wildfire exposure, rebuild costs, proximity to fire services, and community mitigation efforts.
For homeowners in the wildland-urban interface (WUI), the increases are likely to be steep. Urban and suburban homeowners, however, may experience much smaller changes.
**Why State Farm Requested the Increase**
According to the California Department of Insurance, State Farm provided actuarial data showing that the increase was necessary to remain financially solvent in the state.
Karl Susman summarized it simply: State Farm proved to the Department of Insurance that it needed the increase. Under Proposition 103, insurers must justify every rate change before it can take effect—a process that can take months or even years.
California also ranks among the least expensive states for property insurance. While that sounds positive for consumers, it creates profitability challenges for insurers facing soaring claim and reinsurance costs. The result has been widespread pullbacks from major carriers, including State Farm, Allstate, and Farmers, particularly in wildfire-prone areas.
**Consumer Pushback and Fairness Concerns**
The decision drew sharp criticism from consumer advocates, including Harvey Rosenfield, founder of Consumer Watchdog and a key architect of Proposition 103.
Rosenfield argued that raising rates does not guarantee that insurers will return to writing new policies. He emphasized that nothing in the approval requires State Farm—or any carrier—to expand coverage availability.
State Farm itself reportedly confirmed that the increase does not change its current position on issuing new homeowners policies. For many consumers, that means paying more without any assurance of improved access to coverage.
**How California’s Insurance Market Reached This Point**
The current crisis is the result of several long-term pressures converging at once.
Wildfire losses from 2017 through 2021 produced billions in claims and permanently altered risk modeling. Reinsurance costs—the insurance insurers buy for themselves—have more than doubled in five years. Meanwhile, Proposition 103 restricts the use of forward-looking catastrophe models and forces carriers to rely heavily on historical data.
That regulatory structure prevents insurers from pricing today’s climate-driven risk accurately. As Susman has often noted, when the rules no longer reflect reality, insurers simply stop playing—which is exactly what has happened in California.
**The Ripple Effect Across Other Insurance Lines**
The impact of rising costs is not limited to homeowners insurance. FOX KTVU reported significant increases across multiple lines:
State Farm auto insurance is up approximately 21%.
GEICO auto rates are up around 13%.
Allstate auto policies have increased by roughly 30%.
Renters insurance is up about 11%.
For families carrying multiple policies, these increases compound quickly—especially in already expensive regions such as Los Angeles, the Bay Area, and San Diego.
**The Department of Insurance’s Balancing Act**
In approving the rate hike, the Department of Insurance reiterated its dual responsibility: protecting consumers while ensuring insurer solvency.
Commissioner Ricardo Lara’s office stated that the department is focused on ensuring policyholders do not pay more than necessary while also stabilizing the insurance market. These goals often conflict, especially in a climate-driven risk environment.
The broader Sustainable Insurance Strategy introduced in late 2023 aims to modernize regulations, allow catastrophe modeling, and reduce dependence on the California FAIR Plan. However, homeowners are experiencing the financial impact long before the full benefits of reform take hold.
**What the State Farm Increase Means for Homeowners**
For homeowners across California, the increase signals both immediate pressure and a potential long-term turning point.
Premiums will rise unevenly. High-risk wildfire areas face the sharpest increases, while some urban homeowners may see minimal changes. The FAIR Plan may stabilize if private insurers slowly return to the market. Shopping for coverage will remain difficult, requiring persistence and often the help of an experienced broker.
As Susman has said, it is no longer “shopping” for insurance in California—it is “hunting.”
**Transparency, Realistic Pricing, and Market Stability**
The 20% increase reflects a long-delayed market correction rather than a sudden shock in underlying costs. For years, California’s rates have lagged behind the true cost of climate risk and construction inflation.
Without realistic pricing, insurers cannot remain solvent, and consumers ultimately suffer from shrinking availability and weakened competition. However, regulators must ensure that higher premiums translate into broader access—not just improved carrier balance sheets.
Restoring competition remains the state’s best hope for stabilizing prices over time.
**Final Thoughts on California’s Homeowners Insurance Crossroads**
State Farm’s rate hike is both a correction and a test. It will reveal whether higher premiums, combined with regulatory reform, can attract insurers back into the California market and restore meaningful consumer choice.
For now, homeowners must adapt to a rapidly changing landscape by staying informed, reviewing their coverage annually, and working closely with knowledgeable brokers.
As Karl Susman often reminds Californians, insurance is not about fear or politics—it’s about building a system that works again for insurers, agents, and every homeowner trying to protect their most valuable asset.
