State Farm seeks emergency rate increase in California

In a press release, State Farm has shared that its subsidiary, State Farm General, is asking the California Department of Insurance to immediately approve interim rate increases, including 22% average for homeowners.

As of February 1st, State Farm General (Fire only) has received more than 8,700 claims and has already paid more than $1 billion to customers. “State Farm General will ultimately pay out significantly more, as collectively these fires will be the costliest disasters in the history of State Farm General,” the insurer shared.

The company said that the costs of the January 2025 wildfires will further deplete capital from State Farm General, which resulted in one rating agency downgrading State Farm General’s financial strength rating. 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,” State Farm said.

State Farm General asked the California Department of Insurance to immediately approve interim rate increases “to help avert a dire situation” for the more than 2.8 million policies issued by State Farm General, including 1 million State Farm General homeowners customers, and the insurance market in the state of California. State Farm General has had an outstanding filed rate increase pending since June 2024. Pending CDI approval, rate changes will be effective upon renewal after May 1, 2025.

The company added that over the last 9 years, the lack of alignment between price and risk led State Farm General to spend $1.26 for every $1 it collected in premium, resulting in over $5 billion in cumulative underwriting losses.