California Department of Insurance, State Farm agree to a 17% rate increase proposal.

Published Date: 04/09/2025

State Farm is asking to increase its insurance rates after January's devastating wildfires in Los Angeles. The company and the California Department of Insurance appeared in a hearing to address the issue Tuesday.

In an hours long hearing, State Farm asked a judge to recommend the California Department of Insurance Commissioner approve its request for a rate hike.

"No insurer can stay in business that pays more in claims than it collects in premiums year after year," said Kathryn Wellington with State Farm General.

State Farm has come to an agreement with the Department of Insurance that it would request a 17% rate increase instead of its original 22%, and says this would come at no risk to policyholders.

"The interim rate poses no risk to policyholders because if the final rate ends up being lower than the interim rate, policyholders will be entitled to a refund of the difference with interest," said Wellington.

State Farm says if the Insurance Commissioner approves this rate hike, it expects to get an additional $400 million.

"The combination of the interim rate increase, plus the $400 million in surplus note from the parent will immediately improve State Farm General's financial condition," said Nikki McKennedy with the Department of Insurance.

The Department of Insurance is also urging a judge to recommend the commissioner approve the rate increase. 

Meanwhile, Consumer Watchdog, a group advocating for rate payers, says it understands it's a difficult time for the insurance market in California but believes State Farm hasn't justified its request.

"We urge the court to not let this hearing become a bailout for bad business decisions," said William Pletcher with Consumer Watchdog.

He adds refunds would not protect the policyholder.

"Refunds are not a substitute for legalities. They're not a permission slip to charge unlawful rates today to maybe correct them after," said Pletcher.

Understanding this would hurt homeowners, insurance experts say this was bound to happen given the state of the market.

"This could be $400 out of their pocket or $600, which is true, but it's better than not having a policy. This is math. This is not politics.

This is not anything other than we need to be sure that the carriers have money to pay the claims," said insurance expert Karl Susman.
This hearing could last until Thursday. State Farm has witnesses ready to testify on its behalf and once again, the judge is only allowed to recommend a decision to the Insurance Commissioner.