In May 2025, State Farm General Insurance Company, the largest insurer of California homeowners insurance, made history, when the Department of Insurance granted their request for the first ever emergency rate hike. State Farm was allowed to raise rates by 17% for homeowners, 15% for renters and condo owners, and 38% for rental homes starting in June 2025. State Farm says the recent Los Angeles County fires have imperiled their finances, and they require “emergency” cash infusions as it attempts to pay out claims. As of July 6, State Farm received almost 13,000 claims related to the fires and paid over $4.2 billion to California customers, more than any other insurer.
As the largest insurer in the state, the financial stability of State Farm is critical to the health of the insurance market in California. We view the rate increase as a positive development. Other admitted carriers are following suit and filing for rate increases as well. The non-admitted, or surplus carriers, are not required to file for permission to raise rates, and did so within weeks after the Southern California fires. While no one likes paying more for their insurance, these premium increases are critical to stabilize the market, keep the insurance companies solvent, and give them the ability to pay claims.
The CA Fair Plan became insolvent as a result of being over concentrated in the fire affected areas, and not having the appropriate cash on hand and reinsurance to pay the pending claims. The CA Department of Insurance (DOI) requires that the admitted carriers bail out the CA Fair Plan. As a result of the fire losses incurred by the Fair Plan, and according to a new regulation, much of that extra cost to the admitted insurance companies gets passed on to their policy holders. Read: New insurance rules mean homeowners throughout California are likely to pay more after firesMeanwhile, many are still waiting for the California FAIR Plan to pay out their claims.
Insurance companies will see their reserves decline and reinsurance costs substantially increase. With all the added risk to our state with mounting climate change, more fires, and mounting regulations, home insurance premiums in California have not matched up price to the level of risk. What does this mean for your homeowners policy? California premiums are too low, and more corrections are coming. Read:
Implementing the new insurance regulations and proper pricing now have become a huge challenge for insurance companies. Some insurers have paused writing new policies or exited the state entirely. Consumers are facing limited choices (especially in high wildfire areas), extremely tight underwriting, and much higher premiums. Non renewals due to wildfire risk, over concentration and property condition will continue. As stated above, consumers with admitted insurers may be on the hook for reimbursing a portion of the bail out of the Fair Plan that their admitted carrier had to pay. This could possibly happen every time that the Fair Plan is unable to pay for catastrophic wildfire losses! In conclusion, the insurance industry will remain unpredictable and volatile for the foreseeable future for everyone involved in the system.
If you are concerned about your property insurance, open every letter and email, take our call, and read our 5 Tips For Property Owners in 2025.
This important article outlines what you need to do to try to keep the insurance you have, including updates you should make to your home, and what to do if you are non-renewed.