State Farm® in California: Understanding the issues
Proudly serving Californians since 1928, State Farm (State Farm Mutual Automobile Insurance Company, State Farm General Insurance Company) is the leading auto and homeowners insurer in California. We help our customers protect what matters most and recover from the unexpected.
For many California residents, finding insurance coverage has become increasingly challenging. This webpage is here to help you understand the state’s insurance market situation and what’s needed to help ensure long-term sustainability in California. This includes State Farm supporting California’s Sustainable Insurance Strategy and California Department of Insurance (CDI) efforts at implementation.
Introduced by Insurance Commissioner Ricardo Lara, California’s Sustainable Insurance Strategy has the potential to be the most significant insurance reform since Proposition 103 was passed in 1988. Each element of this strategy has the potential, over time, to play a vital role in reviving the insurance marketplace. We will continue to work constructively with the CDI, the Governor's Office and policymakers.
In the meantime, we’re still here for you, serving almost 7.9 million policies and accounts every day. To learn more about our presence and impact in California, check out State Farm in California 2024 by the numbers.
The California market: Insurance coverage crisis
The California insurance market is facing a coverage crisis, leaving many residents without the protection they need for their homes and businesses. It’s crucial to address this situation so residents are properly covered and prepared for any risks they may face.
What's causing the crisis?
Historic increases in costs
Claims costs are being affected by inflation and disruptions in the supply chain. All of this has increased the cost of labor and materials, which translates to higher home repair and rebuilding costs.
Rapidly growing catastrophe exposure
In recent years, the number of acres burned in California has been increasing, and more people are moving into areas prone to fires. This means that when extreme weather events like wildfires happen, the damage can be more costly due to the higher number of people, homes, and businesses at risk.
The January 2025 Los Angeles fires are the largest fire event we have ever experienced in the state and the costliest disaster in company history. As of June 30, 2025, State Farm General has paid $4.17 billion on over 10,600 fire claims and expects to ultimately issue approximately $7.6 billion in total claim payments.
Decades-old insurance regulations
Outdated regulations in California's insurance market, such as lengthy rate approvals and restrictions on pricing to risk, have presented challenges. Proposition 103 has hindered the ability to adjust rates quickly to match the evolving risks of insuring property in the state.
The impact?
Diminished capital could impact an insurer’s ability to pay future claims.
This is why State Farm General Insurance Company is pursuing rate revisions and has taken additional actions to improve its financial strength.
Moving forward, insurance will cost more for Californians as appropriately matching price to risk is critical to maintaining the capital necessary to pay claims.
The Top 12 homeowners insurers in California make up 83% of the insurance market (based on 2023 direct written premium).
Of the 12:
- Nine insurers have paused or restricted new business since 2022.
- Seven companies have disclosed plans to non-renew some of their existing business.
With insurers pausing or restricting new business, non-renewing some of their existing business or leaving the state altogether, the California FAIR Plan – originally intended as the state’s insurer of last resort for basic property insurance in high-risk areas – has grown. Based on their direct written premiums as of September 2023, the FAIR Plan has increased to 5.8% of the California market, which would make it the state’s sixth largest insurer.
Rebuilding the insurance market
The path forward:
A modern regulatory environment would foster a healthy insurance market in California, expanding coverage choices for consumers and ensuring the long-term availability of homeowners and commercial property insurance.
California’s FAIR Plan
The FAIR Plan’s growth is unsustainable. (See California FAIR Plan’s Key Statistics and Data.) Reforms are needed to help guide the FAIR Plan back toward its intended mission as the insurer of last resort.
FAIR Plan claims information and associated impacts from the January 2025 fires are available here: Update from the California FAIR Plan. State Farm General has received a FAIR Plan assessment bill for over $165 million.
Reinsurance priced into rates
Insurance companies buy reinsurance to cover the costs of claims, and these reinsurance rates are also rising. As the Sustainable Insurance Strategy is implemented in 2025 and beyond, insurers will have the ability to factor in the net cost of reinsurance as a legitimate business expense when setting rates. This helps improve access to coverage and is already considered in rates across all states except California.
Predictive risk modeling
California regulators have established a framework that allows the use of forward-looking, scientifically-based risk modeling, which can predict the likelihood of catastrophic events. As the Sustainability Insurance Strategy is implemented in 2025 and beyond, insurers will have the ability to use catastrophe risk modeling when setting rates since relying solely on 20 years of historical losses to determine rates is no longer effective in assessing current risk. Catastrophic risk modeling is used in almost every other state.
Rate process
California regulators continue to work toward a streamlined rate application review process. Currently, California rate filings can take longer than six months to review and up to a year or more when an intervenor is involved. California is one of the only states that allows outside groups to participate in the rate review process.
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State Farm Newsroom announcements
2025: State Farm General Insurance Company: Update on California
March 20, 2024: State Farm General Insurance Company: Update on California
May 26, 2023: State Farm General Insurance Company: California New Business Update