Sharlot Kendall, left, Len Kendall, center, and their 3-year-old daughter walk around the wildfire remnants of their home on Dec. 8, 2025, in Pacific Palisades. The Kendalls complained repeatedly to the California Department of Insurance about State Farm’s handling of their claim. (Kayla Bartkowski / Los Angeles Times)
A brokered deal with regulators and consumer advocates will allow State Farm General to keep controversial increases in home insurance rates that took effect last year in the wake of the devastating Los Angeles wildfires.
The agreement sent to a judge late Friday cements a $530-million emergency hike in home insurance rates Insurance Commissioner Ricardo Lara negotiated with the insurer last summer.
“The agreement will provide financial relief to many policyholders while ensuring continued coverage for State Farm policyholders while California’s insurance market stabilizes,” the insurance department said in a news release.
State Farm argued the emergency hike was necessary because catastrophic fire losses jeopardized its financial ratings.
The company has reported that it paid out $6.2 billion in claims last year, largely from the wildfires, with most of the costs covered through reinsurance payments. The company has told regulators it anticipates to pay an additional $1 billion in claims.
The deal allows the insurer to keep an average 17% increase in homeowner rates. Local rates for many of the company’s 1 million home customers were much higher.
However, consumer advocates argued the agreement held the line on even higher increases and halted further policy cancellations that have deepened a crisis in the state’s insurance industry.
State Farm, California’s largest home insurer, froze new business in 2023, announced 72,000 mass non-renewals, and sought a series of rate hikes. Its average homeowners premium in California doubled from 2020 to 2024.
Under Friday’s agreement, State Farm agrees to forgo mass non-renewals in 2026 and undergo further review of its rates by 2027.
Additionally, State Farm will be required to return nearly two-thirds of its 15% increase to condominium owners, deliver a small refund to rental property owners and be able to raise premiums for renters a half a percent.
“This rate enables State Farm General to continue serving existing California customers,” the company said in a statement. “We will continue to monitor our capacity to support the risks we insure and maintain the financial strength needed to pay claims and support customers and communities when it matters most.”
If approved by an administrative law judge, the settlement will be forwarded to Lara, who is expected to back it.
The arrangement sidesteps efforts to tie State Farm’s rates to its handling of disaster claims.
Under pressure from community advocates and lawmakers, Lara in May had said he wanted the two issues evaluated together.
In June, Lara announced his department would conduct an “expedited” examination into State Farm’s market conduct. In rate hearing proceedings, agency staff sought to block discussion of State Farm’s claims handling in relation to its quest for premium hikes.
A department spokesman said Lara would not comment on the matter while the rate settlement is before an administrative judge.
The Jan. 7, 2025, firestorm destroyed at least 16,000 homes, triggering more than 42,000 insurance claims. State Farm has said it has 13,500 fire and auto claims related to the fires.
The insurer has come under heavy criticism from fire victims over its handling of claims, including complaints of low payout offers, denials for toxin testing and delays in payments for living expenses. The company has declined to comment on the complaints.
Some 51,000 State Farm homeowners live in disaster areas struggling to recover from the L.A. firestorm. Regulatory filings show those areas among the hardest hit by the current hikes.
Malibu resident Chad Peters said his bill from State Farm increased 140% in the last year, from $3,500 to $8,400.
Peters said he has battled State Farm for 14 months over smoke and fire damage to his home from the Palisades fire, and that the insurer at one point attempted to cancel his coverage because the house remained unrepaired.
He called rate increases in such circumstances “ludicrous, while they’re giving everyone such a hard time with their insurance…I mean, mine has been a steep uphill battle all year long.”
Sen. Sasha Renée Pérez (D-Alhambra) had urged Lara to delay hikes until after the investigation into State Farm’s conduct.
“The fact that I have so many individuals who have not received any of their claims, that are still navigating denials and delays, who are actively running out of [living expense payments] and … facing housing insecurity — it makes me deeply concerned,” Pérez said.
Pérez, along with Sens. Ben Allen (D-Pacific Palisades) and Sade Elhawary (D-Los Angeles), in April pressed Lara to defer rate hikes until State Farm General’s claims practices could be investigated. “This was a big priority for us.”
Pérez said she would seek answers to the market conduct exam as part of a Senate inquiry into the insurance department’s handling of those complaints, along with scrutiny of the department’s discipline of a compliance officer who criticized State Farm’s handling of claims.
State Farm General, an offshoot of national insurance giant State Farm Mutual, contends it has been financially sinking as seasonal wildfires morph into catastrophic urban conflagrations that destroy towns.
In mid-2024, the company asked to raise home premiums by nearly $1 billion. Lara secured an agreement that State Farm Mutual lend its California affiliate $400 million, but the insurer would not agree to cancel plans for dropping 11,000 more policyholders.
The settlement allows State Farm to avoid a public hearing that would have forced the disclosure of solvency records, mass non-renewals and other information it said would help competitors.
