Commissioner Lara Calls on State Farm to Provide Answers on Emergency Rate Request

Insurance Commissioner Ricardo Lara has called a meeting with State Farm to answer questions regarding the company’s request for an emergency interim rate increase. In a letter issued today, he wrote: “Under the strict review laid out by Proposition 103, the burden is on State Farm to show why this is needed now. State Farm has not met its burden.” The Commissioner has consistently required full transparency from all parties in the rate-making process—including insurance companies and intervenors—to ensure decisions are based on clear and justified data.

Commissioner Lara has requested State Farm answer critical questions about its financial condition and its proposed rate hikes. He has scheduled an in-person meeting on February 26 where State Farm can address these questions. Key issues include:

• State Farm’s financial stability: Why has the company’s financial position deteriorated despite previous rate increases, and what other steps—beyond raising rates—has the company taken to restore stability?
• Justification for the emergency rate increase: What has changed since State Farm’s last rate filings that now requires urgent relief?
• Consumer impact: How would granting this request affect policyholders, especially those who have already faced premium increases and non-renewals?
• Transparency in decision-making: Has State Farm provided adequate documentation to justify its claims, and is it considering financial support from its parent company?

“All Californians know from the past 10 years that the risks of wildfire are real and growing. We have experienced first-hand the ravages of a changing climate. We are clear-eyed about the work needed to protect our communities. Our decisions must be guided by transparent data and an honest reckoning with the challenges we all face together. As the elected head of the Department, my primary responsibility is to the people of California. This situation highlights the voters’ wisdom in having an independent, elected Insurance Commissioner making decisions to uphold market integrity in response to evolving threats, which today include climate change, rising global reinsurance costs, and a tightening national property insurance market.”

State Farm has requested emergency rate increases, effective May 1, 2025: 22% for Non-Tenant homeowners, 15% for Tenants (Renters), 15% for Tenants (Condominium Unitowners), and 38% for Rental Dwelling. But under Proposition 103, insurers must prove that such increases are necessary and not excessive. Despite multiple approved rate changes, State Farm has stopped writing new policies in California and non-renewed thousands of existing policies, raising serious questions about its financial situation.

The Department has taken bold actions to stabilize the market, requiring insurers to increase coverage in wildfire-prone areas and modernizing the rate review process to improve transparency and accountability without compromising on quality and thoroughness of consumer protection.

The Commissioner has ordered State Farm, the Department, and Consumer Watchdog, the intervenor in the case, to appear at an in-person meeting on February 26, 2025, in Oakland to provide clarity on the company’s financial condition and rate requests.