State Farm General has reached an agreement with California regulators and consumer advocates that will allow the insurer to maintain a 17% average increase in homeowners insurance rates that took effect after the January 2025 Los Angeles wildfires. The settlement, submitted to a judge on March 7, 2026, follows negotiations involving the California Department of Insurance and other parties.
The agreement formalizes a $530 million emergency rate hike that Insurance Commissioner Ricardo Lara negotiated with the insurer in 2024. According to the California Department of Insurance, the settlement aims to provide financial relief to many policyholders while ensuring continued coverage during a period of instability in the state’s insurance market.
If approved by an administrative law judge, the settlement will move to Lara for final review.
Background on the Rate Increase
State Farm stated that the emergency rate hike was necessary due to catastrophic wildfire losses that threatened the company’s financial ratings. The insurer reported paying $6.2 billion in claims in 2025, largely related to wildfire damage. Much of that cost was offset through reinsurance payments. State Farm also told regulators it expects to pay an additional $1 billion in claims related to the fires.
The Jan. 7, 2025, firestorm destroyed at least 16,000 homes and triggered more than 42,000 insurance claims. State Farm said it has received about 13,500 fire and auto claims connected to the event.
The agreement allows State Farm to maintain an average 17% increase in homeowners insurance rates. However, the company noted that rate changes for many of its approximately 1 million California homeowners customers varied by location, with some local increases exceeding that average.
Conditions Included in the Settlement
Under the terms of the settlement, State Farm agreed to several conditions related to its California business operations.
The insurer will halt mass nonrenewals of homeowner policies during 2026. Additionally, regulators will conduct a further review of State Farm’s rates by 2027.
The settlement also includes provisions affecting other property policyholders. State Farm must return nearly two-thirds of a previously approved 15% rate increase for condominium owners. Rental property owners will receive a small refund, and renter insurance premiums may increase by 0.5%.
In a statement, State Farm said the rate increase will allow the company to continue serving existing California policyholders.
The company added that it will continue monitoring its capacity to support the risks it insures and maintain the financial strength necessary to pay claims and support customers and communities.
Previous Market Actions by State Farm
State Farm is California’s largest home insurer. In 2023, the company froze new homeowner business in the state and announced plans to nonrenew 72,000 policies. During the same period, it sought several rate increases.
Regulatory filings show that the insurer’s average homeowners’ premium in California doubled between 2020 and 2024.
In mid-2024, State Farm requested approval to raise homeowners’ premiums by nearly $1 billion. As part of earlier negotiations, State Farm Mutual agreed to lend $400 million to its California affiliate. However, the company did not cancel plans to drop an additional 11,000 policyholders at that time.
State Farm General operates as a California subsidiary of State Farm Mutual, the national insurance company.
Claims Handling and Consumer Complaints
The agreement does not address policyholder complaints about State Farm’s handling of wildfire claims.
Some homeowners affected by the fires have criticized the company for issues such as low payout offers, denials of requests for toxin testing, and delays in living expense payments. State Farm declined to comment on those complaints.
About 51,000 State Farm homeowners live in disaster areas still recovering from the Los Angeles firestorm. Regulatory filings indicate that some of the highest rate increases occurred in those regions.
One Malibu resident, Chad Peters, reported that his homeowners’ insurance premium increased from $3,500 to $8,400 within one year. Peters also said he has spent 14 months disputing smoke and fire damage claims related to the Pacific Palisades fire.
At one point, Peters said the insurer attempted to cancel his coverage because the home had not yet been repaired.
Regulatory Review and Legislative Attention
The settlement comes as lawmakers and community advocates continue to review the state’s oversight of wildfire insurance claims.
Earlier in 2025, Commissioner Lara said he wanted to evaluate the insurer’s rate requests alongside concerns about claims handling. In June of that year, the Department of Insurance announced an expedited market conduct examination into State Farm’s practices.
During rate hearing proceedings, however, department staff sought to prevent discussion of claims handling during the evaluation of premium increases.
State Sen. Sasha Renée Pérez of Alhambra previously urged regulators to delay rate hikes until the investigation concluded. She said she plans to seek additional information about the market conduct examination through a Senate inquiry into how the insurance department handled complaints.
Pérez, along with Sens. Ben Allen of Pacific Palisades and Sade Elhawary of Los Angeles, had asked the commissioner in April to postpone rate increases until the claims investigation was completed.
The Department of Insurance declined to comment further on the matter while the rate settlement remains under review by an administrative law judge.
Settlement Avoids Public Hearing
If approved, the agreement will allow State Farm to avoid a public rate hearing.
Such a hearing could have required the insurer to disclose internal information related to solvency records, mass nonrenewals, and other operational data. State Farm said releasing those details could have given competitors sensitive information.
State Farm has argued that its California business has faced increasing financial pressure as seasonal wildfires have intensified and spread into urban areas, resulting in widespread property losses.
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