A court ruling on Tuesday clears the way for State Farm Insurance to move forward with significant rate increases for homeowners and renters. Homeowners would see an average 17% hike, while renters and condo owners would see prices increase an average of 15%. We spoke to industry expert Karl Susman for his analysis on the situation.

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Millions of State Farm Insurance customers in California will soon experience substantial rate hikes following an emergency increase approved by the state's Insurance Commissioner. The decision, which affects homeowners, renters and rental property owners, comes in response to State Farm's request for financial stabilization.

The approved increases include an average 17% rise for homeowners, 15% for renters and condo owners, and a dramatic 38% spike for rental property owners. These rate hikes are set to take effect on June 1, 2025.

"What this boils down to is, higher risk, higher exposure, means higher premiums," said Karl Susman, an independent insurance agency owner based in Los Angeles.

The rate increases vary based on location and risk factors.

"You might see someone who is nowhere near the brush who has a home, their rate might go up 5%, but somebody who is closer to the hills or in an area that is very high-risk for wildfires might see it go up 25%," Susman explained.

State Farm's request for an emergency rate increase came in the wake of January wildfires in Los Angeles. The company initially sought a 22% increase for homeowners, but later revised to 17%.

An administrative law judge ruled in favor of State Farm's request, describing it as "a rescue mission to stabilize State Farm's financial condition while safeguarding policyholders." California's Insurance Commissioner subsequently backed this ruling.

In exchange for the interim approval, State Farm's parent company has agreed to provide a $400 million cash infusion to the insurance provider. Additionally, State Farm has committed not to drop existing customers through the end of 2025.

A full hearing is expected in October, where State Farm must justify the need for the rate increase.

"If State Farm fails to demonstrate that need, then they had to agree that they will refund that money they've charged, that additional premium, plus interest to all of their affected policyholders," Susman said.

However, Consumer Watchdog, an organization challenging the rate increase, has criticized the Insurance Commissioner's decision. The group argues that "refunds will be too little, too late for homeowners who are already struggling to pay their home insurance premiums."

Customers will see the new rates take effect when their current policies are up for renewal.

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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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Insurance expert Karl Susman discusses the recently approved rate increase and the company’s argument that it's needed in order to do business in California.

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Wildfires and insurance are two things homeowners worry about up here in California's fire country. For those in the Sierra Foothills who are covered by State Farm, the insurer's latest rate increase is something many people will have to budget for.

It's been nearly five years since the River Fire tore through parts of Colfax, burning land and homes. Lizz Porter's family home was one of them.

With help from California's FAIR Plan, her family was able to rebuild. But today, Porter is insured by State Farm, which is a rare provider in fire country.

"From a coverage standpoint, we have a lot more coverage with State Farm, a bit less than what we would be paying on the fair plan," Porter said.

Her premiums already went up last year, but now they're set to rise again.

This week, State Farm got state approval for an emergency rate hike after the company reported significant financial losses following the devastating wildfires in Los Angeles this January, which destroyed 16,000 buildings.

State Farm has been approved to raise rates across three policy types: homeowners insurance will go up an average of 17%, renters and condo insurance will rise by 15%, and landlord policies will increase by 38%. These numbers are averages, and the actual rate changes will vary depending on location. If you live in a city, your increases may be smaller. But for those living in high fire-risk zones, the jump could be much higher.

With peak fire season approaching, state officials fast-tracked the rate increase, which is unusual. Normally, rate hikes of this size go through a lengthy public hearing process before being approved. But in this case, regulators allowed it to move forward without that step, something insurance experts say has never happened before in California.

"That's really the balancing act the insurance commissioner had to go through," said insurance industry expert Karl Susman. "Is it better to approve a higher rate and ensure claims can be paid, or deny it and risk leaving policyholders with nothing when disaster strikes?"

As part of the agreement, the state insurance commissioner says State Farm will not drop additional customers all at once. Still, many homeowners in fire-prone areas are already struggling to get State Farm coverage at all. Most rely on California's FAIR Plan, the state's insurer of last resort. While it's often the only option available, it tends to be more expensive and provides less coverage..

"I think it's not sustainable," Porter said. "I think everything is getting more expensive. It's just not sustainable."

A formal hearing is expected as early as October to review whether the rate increase was justified. If a judge finds it wasn't, policyholders could receive refunds with interest.

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In this video, Karl Susman sits down with Amrit Singh from Spectrum News 1 to explore the intense opening arguments in the State Farm rate hike hearing. The issue has sparked widespread concern among policyholders—particularly those already burdened by high insurance premiums and the ongoing difficulties of claim processing in the aftermath of devastating wildfires. The hearing brought together three key players: State Farm, the California Department of Insurance, and Consumer Watchdog. State Farm delivered a sobering update, disclosing severe financial strain. They revealed that for every $1 collected in premiums, they’re paying out $1.26 in claims. Over the last decade, their financial reserves have plunged from $4 billion to just $600 million—before the most recent wildfires—underscoring the unsustainability of their current financial model. Recognizing the urgency, the California Department of Insurance reviewed the evidence and agreed with State Farm that the situation constitutes a financial emergency requiring immediate action. As this story continues to unfold, staying informed and involved is crucial.

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Two lawsuits filed by homeowners accuse dozens of insurance companies of a "nefarious conspiracy" to exclude policyholders in high-risk areas. Karl Susman, an insurance industry expert, explained what these allegations mean with NBC News' Gadi Schwartz.

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A 5.2 magnitude earthquake that hit Julian and shook the rest of San Diego County has sparked interest in insurance from homeowners countywide.
CBS 8 spoke with experts on what options are available for homeowners to protect their homes.

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