Commissioner Lara adopts judge’s ruling on State Farm emergency rates, balancing consumer protections and financial solvency

News: 2025 Press Release

SACRAMENTO, Calif. – Insurance Commissioner Ricardo Lara adopted a judge’s ruling granting State Farm an emergency rate increase which requires the company receive an immediate $400 million cash infusion from its parent company to address its serious financial condition. State Farm is also precluded from issuing any new block non-renewals through the end of 2025.

Read Commissioner Lara’s order adopting the judge’s ruling.

This resolves State Farm’s request in February for an emergency interim rate. Commissioner Lara met with all parties and then ordered a Department administrative law judge to independently review the evidence and make a proposed decision for his final action. Under California law, Commissioner Lara is the ultimate decision-maker.

After conducting a three-day hearing on April 8-10, the administrative law judge today found that “the evidence presented in the hearing established a prima facie showing that State Farm is experiencing extraordinary financial distress, coupled with surplus depletion that threatens ongoing business operations.”

The judge wrote: “While the interim rates remain temporary and subject to further review, the stipulation seeks to balance consumer protections with the need for financial stability.”

Commissioner Lara issued the following statement:

“Californians deserve a process grounded in fairness, transparency, and integrity — not politics or posturing. That is why I requested an independent review of the evidence by an administrative law judge, who presented a proposed decision. I ordered this hearing to ensure that the parties have the opportunity to present their arguments before a neutral arbiter.

“I am balancing all the facts. Protecting all State Farm customers and the integrity of our insurance market is an urgent matter.

“Let me be clear: We are in a statewide insurance crisis, affecting millions of Californians. Taking this on requires tough decisions. This is not a game. This is not a media-driven moment for some to exploit — this impacts people I am committed to protecting.

“I expect State Farm provide the highest level of service to its California customers and to fulfill its promises. State Farm must now justify its financial condition and detail its recovery plan in a full rate hearing before a neutral judge and my Department’s experts. I am focused on ensuring that State Farm pays its claims to wildfire survivors fully and fairly – and nothing is off the table.”

Commissioner Lara has taken multiple steps to get answers about State Farm’s financial condition and obtain data from the company starting in February 2025.

• February 3: State Farm requested emergency rate increases of 22% for Non-Tenant homeowners, 15% for Tenants (Renters), 15% for Tenants (Condominium Unitowners), and 38% for Rental Dwelling.
• February 14: Commissioner Lara sent a letter to the company raising specific questions and directing the company to answer them in a meeting on February 26. To further public transparency, he released the transcript of the February 26 meeting. As part of that meeting, State Farm representatives committed to paying all claims from the Southern California wildfires.
• March 11: Commissioner Lara held a follow-up call. Following that, he had a follow-up meeting and issued a transcript of the March 11 meeting.
• March 14: He ordered the hearing on State Farm’s emergency rate request and directed a Department of Insurance administrative law judge to review the facts and make a proposed order for his ultimate decision.
• April 8-10: The Department’s Administrative Hearing Bureau conducted the hearing in Oakland.
• May 13: The administrative law judge issued a proposed order for the Commissioner’s review and action. Commissioner Lara adopted that order.

Pending a complete hearing, the order approves a 17% interim rate increase for State Farm’s homeowners line, reduced from the 21.8% the company requested. State Farm will secure a $400 million surplus note from its parent company to reinforce its solvency. The company has also agreed to refrain from implementing new block non-renewal programs through the end of 2025. The emergency rate increase takes effect June 1, with a full rate hearing scheduled to start at a date determined by the judge.

The judge’s ruling adopted by the Commissioner states: “A full rate hearing serves as a critical signal to the marketplace that emergency rate requests of the type State Farm advanced are serious and will undergo rigorous scrutiny. Applicants seeking such measures must be prepared to substantiate their claims through the hearing process, reinforcing the importance of transparency, evidence-based decision-making, and Commissioner’s regulatory oversight.”

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