State Farm Rate Hike Approved Amid California Insurance Crisis

State Farm gains approval for a 17% rate hike in California as the insurer navigates wildfire losses and financial pressure.

May 15, 2025

Nina Dale

California’s insurance commissioner approved a 17% emergency rate hike for State Farm’s homeowner policies.
The increase is smaller than the 21.8% the insurer originally requested.
S&P Global downgraded State Farm General’s rating from AA to A+, citing weak performance and tighter regulations.
State Farm’s parent company will provide $400M in support to its California arm.

Key Takeaways

California Approves Emergency Rate Increase

According to The Real Deal, State Farm will raise homeowner insurance rates by 17% in California. Insurance Commissioner Ricardo Lara approved the emergency hike to help the company recover from wildfire losses earlier this year.

The rate change comes after State Farm asked for a 21.8% increase following the Palisades and Eaton fires. In March, the company also received permission to raise renters’ and condo rates by 15%, and landlord rates by 38%.

S&P Downgrades State Farm General

S&P Global lowered State Farm General’s credit rating from AA to A+ on the same day Lara approved the rate hike. The agency cited weak performance, declining capital, and slow rate approvals in California as key reasons.

To help stabilize its finances, State Farm’s parent company in Illinois will send $400M to its California business. The company said it will repay the loan with interest to avoid shifting the cost to customers in other states.

Temporary Relief, More Hearings Ahead

The 17% hike will affect over 1M policyholders starting in June. But it’s only a temporary measure. The state will hold a full hearing where State Farm must explain its financial health and future plans.

Lara said he will make sure the company pays wildfire claims fairly. He also hinted at a possible investigation into the company’s claims handling after recent complaints from policyholders.

Why It Matters

California faces growing insurance challenges as wildfires become more frequent and costly. Many insurers have reduced coverage or left the market.

State Farm’s emergency rate hike may help it stay in California, but it also highlights the difficult balance between protecting consumers and keeping insurers solvent.