Takeaways:
- Consumer Watchdog says policyholders save $530 million
- Insurer will resume covering policyholders in wildfire areas who were dropped
- Consumer Watchdog's compensation for intervening in rate increase still in dispute
State Farm has settled a lawsuit by the California Department of Insurance (CDI) and Consumer Watchdog over a home insurance rate increase. The settlement also addresses treatment of claimants from the January 2025 wildfires.
The settlement will save policyholders about $530 million overall, according to Consumer Watchdog. In September, State Farm lost motions in a California administrative law court
Other categories of increases will be reduced as follows under the settlement:
- Rental dwelling policies. An approved interim increase of 38% will be reduced to 32.8%.
- Condo policy rate increase of 15% will be reduced to 5.8%.
- Renters insurance policies rates will rise 15.65%, instead of 15% granted in the interim increases.
All affected consumers, including rental dwelling and condo policyholders, will get refunds dating to June 1, with 10% interest.
The settlement also prevents State Farm from new block non-renewals of homeowner policies during 2026, and continues coverage for policies slated for non-renewal in wildfire-affected areas. The settlement also requires State Farm's rates to be reviewed again no later than 2027, and sets a level of premium-to-surplus ratio, at which renewing policyholders will get a one-time 2.5% premium discount.
"State Farm originally sought staggeringly massive increases that were not supported by the data," stated William Pletcher, litigation director at Consumer Watchdog, in a press release. "This settlement substantially reduces those requests, secures refunds for some policyholders, and includes additional protections affecting non-renewals, claims oversight, and future rate review."
For policyholders whose emergency interim rate increases, approved after last year's wildfires, are higher than those in the settlement, the difference will be refunded.
In an email response, Tom Hartmann, a spokesperson for State Farm, stated, "Many Californians are worried about home insurance right now. When a home is often a family's largest investment, questions about coverage and cost can feel deeply personal. With this agreement the interim homeowners rate increase of 17%, which went into effect in June 2025, will become final pending approval. This rate enables State Farm General to continue serving existing California customers. 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."
The administrative law judge overseeing the case about the rate increases is expected to approve the settlement in early April. The settlement is then subject to approval by the insurance commissioner. After that, Consumer Watchdog can pursue compensation for its work against the rate increase, under the state's intervenor process. The commissioner has previously disputed the advocacy group's eligibility for compensation, proposing new rules
Lara's new proposed intervenor compensation rules were
