State Farm seeks emergency rate hike after Los Angeles wildfire losses

Published Date: 02/12/2025

State Farm is seeking an emergency rate increase after the Los Angeles wildfires in January.

The insurance company asked the California Department of Insurance (CDI) on Monday to immediately approve interim rate increases, averaging about 22% for homeowners.

The company says — as of Feb. 1 — that it’s received more than 8,700 claims and paid out more than $1 billion, and it expects to pay out significantly more, depleting its capital.

“Last year, one rating agency downgraded State Farm General’s financial strength rating due to its capital position,” State Farm wrote in a news release. “With further capital deterioration as a result of the wildfires, additional downgrades could follow. If that were to happen, customers with a mortgage might not be able to use State Farm General insurance on the collateral backing for their mortgage.”

The company says it needs the interim rate increases approved to “help avert a dire situation” for customers and the insurance market in California, noting it’s had an outstanding filed rate increase pending since June.

They say the interim rate increases are needed to allow State Farm General to rebuild capital, noting in recent years they’ve made the decision to limit overexposure in high-risk areas. The company previously stopped writing any new policies in California in May 2023.

The CDI says the rate filing raises serious questions about State Farm’s financial condition. They say they will investigate the rate applications thoroughly.

This request comes after the insurance company sought a rate hike of at least 30% last summer.

Some experts, like Rex Frazier, president of the Personal Insurance Federation of California, argue that the increase is a necessary step for the company’s survival.

“This is a very serious situation,” said Frazier. “They would have made this request, whether or not there were fires in Los Angeles.”

Frazier emphasized that without the requested rate hike, State Farm may be forced to reduce its coverage, jeopardizing its ability to insure homes.

While some see the rate increase as essential, consumer advocates contend that State Farm is exploiting the wildfire tragedy to push through an unnecessary price hike.

Carmen Balber, executive director of Consumer Watchdog, expressed concern over the company’s lack of transparency.

“The request is really a slap in the face to Californians who have been harmed,” Balber said. “By our calculations, preliminarily, the company would have to prove it had lost $9 billion in order to justify a 22% rate increase. So far, they said they have paid out $1 billion, so the numbers simply do not add up."

Balber says the group should instead look inwards to solve the problem.

“If State Farm is in financial trouble, the parent company should be stepping in. And the parent company has the cash to do that,” Balber said.

Insurance expert Karl Susman also raised concerns, pointing to State Farm’s history of covering high-risk areas where many other insurers have opted not to write policies. He noted that the company has been struggling financially for the past year.



“The way they have asked for it is what is called an emergency request. It does not go through the normal channels, which is probably why the first request six months ago did not go anywhere. The Department of Insurance is very consumer friendly, and they do not give rates out easily,” he said.