Millions of Californians will face higher property insurance rates starting next month after State Farm received formal approval from the state’s insurance commissioner.
The following rate increases will go into effect June 1:
- 17% increase for homeowners
- 15% increase for condo and renters
- Up to 38% increase for rental homes
The ruling comes five weeks after the company’s April 8 hearing in Oakland, where State Farm’s actuary testified that they hadn’t done the official calculations required by law to prove a 17% high increase was necessary.
However, the administrative law judge still signed off. He works under the California Department of Insurance (CDI) and Commissioner Ricardo Lara, who had temporarily approved the request.
“It’s a huge disappointment for consumers that the judge said consumers should pay now, but allow State Farm to wait many months before proving their rate increase,” said Carmen Balber, executive director of Consumer Watchdog. “That’s what we’re seeing with today’s decision.”
State law requires insurance companies to prove rate increases before they take effect. But that didn’t happen here. Instead, the temporary increases go into effect June 1. The CDI plans to hold another hearing to prove State Farm’s rate increase in October. That could be better or even worse for consumers.
“That’s what’s really ahead for consumers — the possibility of a refund or even higher increases in October,” Balber said.
“We sleep at night wondering how we’re going to make it,” said Mariane Directo, a longtime State Farm customer.
In her 30 years with the company, Directo’s first and only claim was denied.
“We even had an outside inspection that rejected the denial. And they wouldn’t let us appeal,” she said. “I want to get out of State Farm completely… I don’t trust them anymore!”
This will be State Farm’s second rate increase since March 2024.
It forced her to sell her family’s heirlooms.
“I had some gold jewelry passed down from my mother that meant so much to me, it broke my heart… I had to sell it all to make those payments,” Directo said.
The decision financially harms families, especially in LA County, who are struggling to get State Farm to pay wildfire claims.
“According to Ricardo Lara, State Farm is the number one worst insurance company when it comes to actually fulfilling contractual obligations,” said Joy Chen, a former LA deputy mayor, who now leads the Eaton Fire Survivors Network.
The group sent a letter asking the Commissioner to investigate State Farm, including nearly 400 personal messages from survivors sounding the alarm about the company’s activities.
“Despite all this evidence, all the accounts of State Farm failing to meet its obligations, he continues to reward them… rather than investigate them,” Chen said. “So, we’re disappointed that this is who we elected!”
Meanwhile, in response to this decision, Lara wrote: “I expect State Farm to provide the highest level of service to its California customers and deliver on its promises. State Farm now must demonstrate its financial condition and detail its recovery plan in a full rate hearing before a neutral judge and my Department’s experts. I am focused on ensuring that State Farm fully and fairly pays wildfire claims to survivors — and nothing less.”
What about the rest of us?
“This could set a very dangerous precedent if it stands for other insurance companies,” Carmen Balber said. “If State Farm can raise rates before proving it, what’s to stop the rest of the insurance industry from seeking similar concessions?”
State Farm said it has paid more than $3.51 billion to customers after the LA fires.
The company welcomed the decision, writing: “We thank the Administrative Law Judge for his careful consideration of this important matter. Today’s Commissioner approval of the emergency temporary rate is an important first step so that State Farm General (SFG) can continue serving our California customers. SFG must still continue to build sufficient capital for the future.
With this temporary rate approval, SFG will receive from its parent company, State Farm Mutual (SFM), an advance of $400 million under a surplus note that will be issued by SFG, subject to regulatory approval. SFG will be obligated to repay the surplus note balance plus interest over time, subject to certain conditions, as outside California customers should not have to pay for California risk. SFG, to improve its financial position, will continue to pursue permanent rate adjustments in an upcoming rate hearing.
SFG will continue to assess its business operations as conditions change and is temporarily suspending the non-renewal of new groups throughout 2025 for non-renter homeowners; renter-renters; renter-condo owners; and rental property.
We remain focused on helping our customers recover from the wildfires. As of May 12, we have paid more than $3.51 billion and are processing more than 12,692 claims.
We thank the Commissioner for this approval and look forward to continuing to work with the Commissioner and others on a more sustainable insurance market in California.”
By Stephanie Sierra – ABC7 News
