Outrage as State Farm General To Raise Insurance Rates in California Up To 38% Starting Next Month

Millions of Californians are set to face steep insurance hikes starting 1 June 2025 after State Farm General, the state's largest home insurer, received approval to raise its rates by as much as 38%. The move affects homeowners, renters, and landlords, and was authorised by California Insurance Commissioner Ricardo Lara in response to the rising costs of covering wildfire-related damage.

The decision has triggered public backlash, particularly among consumer advocacy groups, who argue the rate hikes were approved through a rushed and opaque process. While State Farm says the increases are needed to maintain solvency amid escalating climate disasters, many residents say the burden is being unfairly shifted onto everyday policyholders already struggling with California's high cost of living.

A System Under Strain

The approved hikes break down as follows: a 17% increase for homeowners, 15% for renters and condominium owners, and a striking 38% increase for rental property insurance. State Farm claims the rate changes are essential to stabilise its California operations, having reportedly lost over $1 billion due to wildfire-related claims in recent years.

To bolster its position, the company is injecting $400 million into its California unit from its parent company. It has also agreed to pause certain policy non-renewals until the end of 2025. But for those hit hardest, the concessions have done little to ease concerns.

'Show Us the Math'

Consumer Watchdog, one of the state's leading advocacy groups, has been vocal in its criticism. Executive Director Carmen Balber called the approval process 'deeply flawed' and criticised the lack of public input before the rate increase was granted. 'In California, we say you have to show your math,' Balber said. 'That didn't happen here.'

She and others have raised concerns that this decision could set a troubling precedent, allowing large insurers to bypass scrutiny while consumers are left with no choice but to pay more or go without cover. Although a formal evidentiary hearing is scheduled for October, by then the new premiums will already be in effect.

A Market Under Pressure

California's insurance market has become increasingly fragile, as more companies withdraw from high-risk areas. Firms like Allstate and AIG have already limited or stopped issuing new policies in parts of the state, citing rising costs and unpredictable losses due to climate change. State Farm's hike is seen by many as a sign that even the largest players are struggling to keep pace.

Industry analysts warn that if the trend continues, Californians could find themselves with limited—or unaffordable—options for home insurance, particularly in wildfire-prone regions.

A Personal Cost

For many households, these rate hikes are more than just a budget concern—they're a potential crisis. Across the state, homeowners are expressing worry that they may have to reduce coverage or go uninsured altogether. One advocate noted, 'These price hikes are coming at the worst possible time. People are already stretched thin, and now they're being told to pay hundreds more a year just to protect their homes.'

Advocacy groups argue that this adds another layer of inequality to California's housing market, hitting working families the hardest and potentially widening the gap between those who can afford protection and those who cannot.

What Happens Next?

Although the new rates will take effect in June, State Farm may still be required to justify the hikes in the October hearing. If the increases are found to be unjustified, the company could be ordered to issue refunds to affected customers.

In the meantime, Californians are left to bear the immediate cost. As climate risks rise and insurers seek to recoup losses, the balance between industry sustainability and consumer protection is becoming harder to strike. What's clear is that in the battle between profit and policyholder, the everyday homeowner is being left in the middle.