Sacramento, California – California’s top insurance regulator on Friday said it would approve state farms’ emergency requests to increase premiums for around 1 million customers by 22% if the insurance giant could justify hiking at the hearing.
State Farm, the state’s largest insurance company with approximately 1 million household insurance contracts in California, said it will help recapitalize its capital following the Los Angeles wildfires that destroyed more than 16,000 buildings, mostly homes. The company is trying to prevent a “disastrous” financial situation, which management said could push homeowners into the state’s last resort insurance option.
California insurance commissioner Ricardo Lara said other California insurance companies won’t be able to absorb clients on state farms if the insurance giant shuts down in California, but they want more data on how the company manages its finances and calculates risk. He asked the company to publicly present the argument to the judge on April 8th. Lara then makes a final decision.
“State Farm claims it is committed to its California clients and aims to restore financial stability. We hope that both the state farm and its parent company will meet its liability and not bear a complete burden on its customers,” Lara said in a statement. “The facts will be revealed in an open and transparent hearing.”
Lara also called on the company to request a $500 million capital injection from the parent company to stabilize its finances at this week’s personal meeting, according to the conference’s transcript.
At the same meeting, state farms said they would halt cancellations and not update their “at least one year” policy if they were approved for an interest rate increase. The company announced last year it had eliminated coverage for 72,000 homes and apartments in California after saying it would not be issued a new home policy in the state in 2023.
Consumer WatchDog, a consumer advocacy group that opposed the state’s farm demand, said the 22% increase could amount to $600 a year for homeowners. The group previously said that if Lala had experienced it, she would challenge her approval.
State Farm and Consumer Watchdog did not respond immediately to requests for comment.
Emergency fees include an interest rate increase of 22% for homeowners, 38% for rental owners and 15% for tenants. If Lara finally approves it, they will come into effect in June. The decision comes as California has been making years of efforts to seduce insurance companies to continue their business in the state as wildfires are increasingly destroying their entire neighborhood. In 2023, several major companies, including State Farm, stopped issuing housing policies due to high fire risk. Last year, Lala announced all regulations, aiming to give insurance premiums more latitudes in exchange for more policies in high-risk regions. These rules occur this year.
A state farm official told state officials that the company was already struggling before the LA fire. The company was subjected to a financial rating downgrade last year, with a $5 billion drop in surplus accounts over the past decade. Last year, the company asked the state to raise the rate by 30%, but state officials are still considering it.
La Fires, now estimated to be the most expensive natural disaster in US history, has made things worse, state farm officials said. Last month, the company paid around $1.75 billion to 9,500 claims, with a total loss of more than $7 billion. According to State Farm, that surplus fell from $1.04 billion at the end of 2024 to $400 million since the fire. The company uses surplus and reinsurance to settle claims.
The state farm said it plans to refund emergency fees if California approves a lower interest rate through the company’s request last year. The insurance company finally received state approval for a 20% interest rate increase in December 2023.
Associated Press by Copyright © 2025. Unauthorized reproduction is prohibited.
