State Farm reaches a deal to keep controversial rate hike

A brokered deal with regulators and consumer advocates will allow State Farm General to keep controversial increases in home insurance rates that took effect last year in the wake of the devastating Los Angeles wildfires.

- BY PAIGE ST. JOHN

CONSTRUCTION worker Miguel Rivera works on a home in Pacific Palisades.

The agreement sent to a judge late Friday cements a $530-million emergency hike in home insurance rates Insurance Commissioner Ricardo Lara negotiated with the insurer last summer.

"The agreement will provide financial relief to many policyholders while ensuring continued coverage for State Farm policyholders while California's insurance market stabilizes," the insurance department said in a news release.

State Farm argued the emergency hike was necessary because catastrophic fire losses jeopardized its financial ratings.

The company has reported that it paid out $6.2 billion in claims last year, largely from the wildfires, with most of the costs covered through reinsurance payments. The company has told regulators it anticipates to pay an additional $1 billion in claims.

The deal allows the insurer to keep an average 17% increase in homeowner rates. Local rates for many of the company's 1 million home customers were much higher.

However, consumer advocates argued the agreement held the line on even higher increases and halted further policy cancellations that have deepened a crisis in the state's insurance industry.

State Farm, California's largest home insurer, froze new business in 2023, announced 72,000 mass non-renewals, and sought a series of rate hikes. Its average homeowners premium in California doubled from 2020 to 2024.

Under Friday's agreement, State Farm agrees to forgo mass non-renewals in 2026 and undergo further review of its rates by 2027.