State Farm raising California homeowner policies by 20% in 2024

Having a good neighbor as an insurer in California is about to cost a lot more.

Illinois-based insurance giant State Farm is expected to increase its average rate for homeowner insurance policies in California by 20 percent next year, under a proposal approved by the Department of Insurance, the Sacramento Bee reported.

Last year, State Farm held more than one in five homeowner policies in the state, the largest of any company, according to the department. 

The approved increase comes during headwinds for the state’s insurance market, while a growing number of residents have seen higher prices and fewer insurance options as major companies have paused or restricted new business.

In May, the 101-year-old State Farm announced it is no longer accepting new applications for property insurance in California, citing rising construction costs and increasing wildfires.

In an emailed statement, company spokesman Sevag Sarkissian said increased costs and risk were also behind the recently-approved rate change.

“We are committed to working cooperatively with public policymakers and officials on reforms that promote market stability and the long-term interests of our California customers,” Sarkissian told the Bee.

Insurance Commissioner Ricardo Lara announced a series of policy actions last fall he hopes will reach similar outcomes. 

They include allowing insurance companies to use computer models to better plan for future losses and to recover costs related to insuring their California policies. In exchange, insurance companies would agree to insure a certain percentage of homes in areas of the state with high wildfire risks.

Details of the proposed changes have not been finalized and the department also has to get new regulations approved before they are implemented, according to the Bee.

Lara, at a hearing in front of state lawmakers this month, called California’s insurance rules outdated and no longer reflective of current risks. He said the department hoped to have the new regulations done by next December.

Until then, the commissioner acknowledged uncertainty would continue in insurance availability and pricing. “It’s going to be tough, I want to say, for the next couple months, but hopefully you’re going to start to see the market start stabilizing itself,” Lara said.

Companies such as State Farm, Allstate and Farmers Insurance stopped issuing or limited new policies throughout much of the state after notifying homeowners their policies would not be renewed.

For many, the only options are an expensive state-mandated policy known as the FAIR Plan, offering minimal coverage, or no insurance at all — if they don’t have a mortgage that requires it, the San Jose Mercury News reported.

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Participation in the FAIR plan, set up to require insurers to provide basic coverage in high-risk areas where it’s otherwise unavailable, has more than doubled since 2018 to about 3 percent of state policies.

Nonetheless, Californians who approved some of the nation’s toughest insurance regulations in 1988 have enjoyed a break on home policies, according to the Insurance Information Institute. 

The state’s average homeowners insurance premium was $1,241 in 2020, the most recent data available. That’s below the U.S. average of $1,311, and those in Florida, at $2,165, Oklahoma, at $2,040 and Louisiana, at $2,038, states regularly hit by hurricanes and tornadoes.

Yet the institute reports that the 10 costliest U.S. wildfires in insured losses all occurred in California, eight of them in the last decade.

— Dana Bartholomew