FOX - KTVU - California Approves Rate Hike For State Farm Home Insurance

Published Date: 01/17/2024

California Approves 20% Rate Hike for State Farm Home Insurance: What It Means for Homeowners

California’s homeowners insurance crisis just entered a new phase.

In early 2024, State Farm, the state’s largest property insurer, was granted permission to raise its homeowners insurance rates by an average of 20% — the first major increase since the company paused new policies in 2023. The decision, approved by the California Department of Insurance, sparked mixed reactions across the industry, pitting consumer advocates against regulators and insurers who insist the change is long overdue.

FOX KTVU’s Tom Vacar broke down the numbers, interviewing experts on both sides — including independent insurance agent Karl Susman — to unpack what this means for California’s strained insurance market.

1. The Numbers Behind the Rate Hike

The approved increase averages 20% statewide, but the real-world impact will vary dramatically.

As John Baker explained in the FOX report:

“Some may experience a very tiny rate increase — 2, 3, or 5 percent — while those in higher-risk areas could receive a 50 percent increase, possibly even more.”

That’s because homeowners insurance rates are location-based, tied to factors like wildfire exposure, rebuild costs, local fire protection, and community-level mitigation.

In essence, your ZIP code — and sometimes even your street — determines your risk profile.

For many Californians living in the wildland-urban interface (WUI), that means steeper increases, while suburban and urban homeowners could see only modest adjustments.

2. Why State Farm Requested the Increase

According to the Department of Insurance, State Farm provided evidence that the increase was necessary to remain solvent in the state.

Independent agent Karl Susman, interviewed by FOX, put it plainly:

“State Farm proved to the Department of Insurance that it needed the increase.”

California’s unique regulatory system, governed by Proposition 103, requires insurers to justify every rate change. Unlike most states, carriers can’t simply raise rates in response to inflation or reinsurance costs — they must demonstrate actuarial necessity.

The catch? The review process can take months or even years, leaving insurers unable to keep up with market realities.

“In California, we rank somewhere around the sixth or seventh least expensive state for property insurance in the country,” Susman noted.

That sounds positive — until you realize that low premiums mean low profitability for insurers trying to cover soaring claims costs.

The result? Major carriers — including State Farm, Allstate, and Farmers — have limited new business or stopped writing entirely in high-risk zones.

3. Consumer Concerns: Is This Fair to Policyholders?

The rate approval drew immediate criticism from consumer advocates, particularly Harvey Rosenfield, founder of Consumer Watchdog and one of the original authors of Proposition 103.

“His belief — and it’s completely wrong — is that the companies will come back into the market and start selling insurance again if he just gives them everything they want,” Rosenfield told FOX. “That’s not going to work.”

Consumer Watchdog’s position is that rate hikes without accountability fail to solve the underlying crisis. They argue that allowing insurers to charge more doesn’t guarantee they’ll return to writing new policies — and State Farm’s own comments appear to support that.

When asked whether any rate increase would bring them back into the homeowners market, State Farm reportedly said no.

“Under these rate increases, there is no requirement that any of these insurance companies sell a single additional policy to anybody,” Rosenfield emphasized.

In short, higher premiums might stabilize insurers’ finances — but they don’t guarantee relief for homeowners seeking coverage.

4. How Did We Get Here?

To understand this rate hike, you have to look at the bigger picture.

California’s insurance market has been under severe strain for years, primarily due to wildfires, reinsurance costs, and outdated regulations.

Key Factors Driving the Crisis

• Climate volatility: Record wildfires in 2017–2021 generated billions in claims and reshaped risk modeling.
• Reinsurance inflation: Global reinsurance rates — the cost insurers pay to insure their own risk — have more than doubled in five years.
• Regulatory lag: Proposition 103 requires prior approval for rate filings and restricts the use of predictive catastrophe models, forcing insurers to rely on past data rather than future projections.

That means carriers must set prices as if tomorrow’s wildfire season will look exactly like yesterday’s — even when climate science says otherwise.

The result? An unsustainable system where insurers can’t price risk accurately, prompting them to scale back operations.

“When you have rules that don’t work, and you’re forced to play by those rules, what do you do?” Susman asked rhetorically in a previous Insurance Hour episode. “You stop playing.”

That’s precisely what happened.

5. A Statewide Ripple Effect

This isn’t just a homeowners issue. As FOX KTVU reported, rate hikes are affecting multiple product lines:

• State Farm auto drivers: up 21%
• Geico drivers: up 13%
• Allstate drivers: up 30%
• Renters: up 11%

For families juggling multiple policies, the increases add up fast — especially in high-cost-of-living regions like Los Angeles, the Bay Area, and San Diego.

One viewer interviewed in the FOX report summed it up bluntly:

“We’re still looking, but we don’t think at the moment we can go buy a house in California.”

6. The Department of Insurance’s Balancing Act

In approving State Farm’s request, Insurance Commissioner Ricardo Lara’s office issued a statement underscoring its dual responsibility:

“Commissioner Lara is focused on protecting consumers and using every tool at the department’s disposal to make sure policyholders do not pay more than they are required.”

That balancing act — between affordability for consumers and solvency for insurers — is at the core of California’s reform efforts.

The Department’s broader Sustainable Insurance Strategy, announced in late 2023, aims to modernize regulations, reintroduce catastrophe modeling, and reduce dependence on the California FAIR Plan, the state’s insurer of last resort.

But in the short term, homeowners are feeling the squeeze.

7. What This Means for Homeowners

For California homeowners, the State Farm rate increase signals both a challenge and a potential turning point.

Here’s what to expect:

• Premiums will rise — but not uniformly. Urban and suburban policyholders may see small adjustments, while high-risk zones could face double-digit hikes.
• FAIR Plan enrollment may stabilize if private insurers slowly return to writing business.
• Shopping for coverage will remain difficult — but persistence and broker expertise can help.

“It’s not shopping anymore — it’s hunting,” as Susman said in a recent broadcast. “You’re hunting for a policy right now.”

The hope is that this rate adjustment — combined with regulatory reforms — will create a more sustainable market where insurers can once again compete on coverage and service, not just survival.

8. The Bigger Lesson: Transparency and Realism

While the 20% increase sounds dramatic, it’s part of a necessary recalibration. For years, California’s rates have been artificially low, masking the true cost of climate and construction risk.

Without realistic pricing, insurers can’t stay solvent, and consumers ultimately suffer from reduced availability and limited competition.

That said, regulators must ensure that higher rates translate to broader access — not simply higher profits.

As the FOX KTVU report concluded, California’s best hope lies in restoring competition:

“The best hope? That more insurers come back and boost competition to lower California prices.”

Final Thoughts

California’s homeowners insurance market stands at a fragile crossroads.

State Farm’s 20% rate hike represents both a correction and a test — of whether higher rates can actually bring stability back to a system on the verge of collapse.

For now, the state remains a proving ground for insurance reform. And for homeowners, the path forward is clear: stay informed, review coverage annually, and work with knowledgeable brokers who can help navigate this turbulent transition.

“Insurance isn’t about panic or politics,” as Karl Susman often says. “It’s about making the system work again — for insurers, for agents, and for every Californian trying to protect their home.”