State Farm, California’s largest home insurer, has received emergency approval to increase insurance rates starting June 1, following a judge’s recommendation and a conditional greenlight from Insurance Commissioner Ricardo Lara. This marks the first time an insurer in the state has been granted such approval on an emergency interim basis.

State Farm requested the hikes earlier this year, citing financial distress and over $7 billion in expected claims from the January Los Angeles County wildfires. The Department of Insurance initially recommended approval, but Commissioner Lara sought additional financial information and asked whether the company could receive help from its parent, State Farm Mutual.

Ultimately, Administrative Law Judge Karl-Fredric Seligman ruled in favor of the hikes after a public hearing, describing them as “a fundamentally fair, adequate, and necessary measure” to stabilize the company. Commissioner Lara adopted the ruling, allowing the company to raise:

* Homeowners insurance by 17%
* Renters and condo policies by 15%
* Rental dwelling coverage by 38%

Lara stated the rate hikes are a necessary step to protect both policyholders and the broader insurance market, though he noted the company must still fully justify the increases in a formal rate hearing later this year.

**Consumer Pushback**

Consumer advocacy group Consumer Watchdog criticized the decision, claiming it violates Proposition 103, which requires insurers to prove rate hikes are justified before implementation. Executive Director Carmen Balber called it a "great disappointment for consumers."

Concerns have also been raised about State Farm’s handling of fire-related claims. Survivors and lawmakers have accused the company of delays and denials. Commissioner Lara emphasized that the rate decision is separate from those complaints, although he pledged to ensure that claims are handled fairly and did not rule out a formal investigation.

Joy Chen of the Eaton Fire Survivors Network warned the move sets a troubling precedent, signaling to consumers that they may not be supported when disaster strikes despite paying premiums.

**State Farm's Response**

State Farm spokesperson Sevag Sarkissian defended the company’s efforts, noting they deployed the largest claims team in the industry. CEO Dan Krause said less than 3% of the 10,000+ fire-related claims have received complaints. He also responded to Lara’s inquiry about increasing contents coverage, declining a boost from 65% to 75% without requiring itemized inventories.

As part of the emergency approval, State Farm agreed to:

* Secure a $400 million surplus loan from its parent company
* Stop canceling homeowner policies through the end of 2025
* Refund customers if final approved rates are lower than interim rates

A full rate hearing, initially expected in June, may be postponed until October to give all parties time to prepare. Judge Seligman stressed that such hearings are vital to ensure emergency rate hike requests are subjected to rigorous evaluation.

Despite the controversy, both the Insurance Department and State Farm argue that allowing the rate hikes helps prevent further financial instability and ensures insurance availability for over a million homeowners in the state.

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State Farm is asking to increase its insurance rates after January's devastating wildfires in Los Angeles. The company and the California Department of Insurance appeared in a hearing to address the issue Tuesday.

In an hours long hearing, State Farm asked a judge to recommend the California Department of Insurance Commissioner approve its request for a rate hike.

"No insurer can stay in business that pays more in claims than it collects in premiums year after year," said Kathryn Wellington with State Farm General.

State Farm has come to an agreement with the Department of Insurance that it would request a 17% rate increase instead of its original 22%, and says this would come at no risk to policyholders.

"The interim rate poses no risk to policyholders because if the final rate ends up being lower than the interim rate, policyholders will be entitled to a refund of the difference with interest," said Wellington.

State Farm says if the Insurance Commissioner approves this rate hike, it expects to get an additional $400 million.

"The combination of the interim rate increase, plus the $400 million in surplus note from the parent will immediately improve State Farm General's financial condition," said Nikki McKennedy with the Department of Insurance.

The Department of Insurance is also urging a judge to recommend the commissioner approve the rate increase.

Meanwhile, Consumer Watchdog, a group advocating for rate payers, says it understands it's a difficult time for the insurance market in California but believes State Farm hasn't justified its request.

"We urge the court to not let this hearing become a bailout for bad business decisions," said William Pletcher with Consumer Watchdog.

He adds refunds would not protect the policyholder.

"Refunds are not a substitute for legalities. They're not a permission slip to charge unlawful rates today to maybe correct them after," said Pletcher.

Understanding this would hurt homeowners, insurance experts say this was bound to happen given the state of the market.

"This could be $400 out of their pocket or $600, which is true, but it's better than not having a policy. This is math. This is not politics. This is not anything other than we need to be sure that the carriers have money to pay the claims," said insurance expert Karl Susman.
This hearing could last until Thursday. State Farm has witnesses ready to testify on its behalf and once again, the judge is only allowed to recommend a decision to the Insurance Commissioner.

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Insurance broker Karl Susman joins ABC News Live to discuss what to do if your homeowners insurance has gone up.

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