California Approves Temporary 17% Rate Increase for State Farm Amid Wildfire Fallout

California officials have approved a temporary 17% increase in homeowners insurance rates for State Farm customers, amid ongoing fallout from devastating wildfires earlier this year.

The move, authorized by the California Department of Insurance, comes as State Farm cited financial distress following the Eaton and Palisades fires in Los Angeles County, which together destroyed over 16,000 buildings.

The rate hike, set to take effect on June 1, follows a previous 20% increase granted last year. While State Farm initially requested an emergency increase of nearly 22%, the company settled on 17% after negotiations with state officials. The increase will remain in place at least until a scheduled hearing later this year, where the company will be required to justify its financial position and present a long-term recovery plan.

The decision has drawn criticism from consumer advocacy groups and wildfire survivors, who argue that the rate hikes are unfair—especially as some State Farm policyholders report delays and difficulties in receiving payouts for their destroyed homes.

“The decision to grant State Farm’s unprecedented request for an emergency rate increase disregards the hardships faced by fire victims and their calls for accountability,” said State Senator Sasha Renée Pérez, who represents areas affected by the fires.

Consumer Watchdog, a nonprofit group opposing the rate hike, accused State Farm of exaggerating its financial losses and failing to provide sufficient documentation to support its claims. Executive Director Carmen Balber said the approval “adds insult to injury” for policyholders already struggling with slow or reduced claim settlements.

California Insurance Commissioner Ricardo Lara defended the decision as a necessary step in a broader insurance crisis affecting the state.

“Let me be clear: We are in a statewide insurance crisis affecting millions of Californians. Taking this on requires tough decisions,” Lara said in a public statement.

An administrative judge inside the Department of Insurance found that State Farm’s California subsidiary, State Farm General, is facing “extraordinary financial distress” and a depletion of surplus funds that could threaten its business operations. As part of the approval, State Farm’s parent company is required to inject $400 million into its California division.

The outcome of this temporary rate hike could have ripple effects across the insurance industry. If the rate is upheld in the fall hearing, other insurers may follow with similar requests, further impacting homeowners in a state already grappling with escalating risks from wildfires and natural disasters.

Despite the hike, the Department of Insurance noted that State Farm agreed not to implement new non-renewal programs — which could lead to mass policy cancellations — through the end of 2025.

In response to criticism over how wildfire claims have been handled, State Farm said in a statement that it is working with each customer “to resolve their claim” and emphasized that the wildfires represent the most significant fire losses the company has ever faced in California.

The New York Times and CBS News contributed to this report.