California Insurance Rates to Rise for More Than 600,000 Residents

California regulators have approved two major insurers' requests to raise rates for a total of 660,000 customers starting later this year. The rate hikes, according to the insurers, were necessary to address the higher costs they are facing as natural disasters such as the Los Angeles wildfires are increasingly getting more frequent and more severe.

Why It Matters

California was in the midst of a property insurance crisis even before the Los Angeles County wildfires last month, exacerbating the problems in the state's market. While the risk of devastating extreme weather events has increased in recent years because of climate change, regulators in the state have artificially kept rates low for residents' sake.

Faced with higher costs and rising catastrophe exposure, several major insurers have cut coverage across California in recent years, leaving homeowners scrambling for options. Experts fear that the Los Angeles wildfires might bring the crisis to a "new level."

What To Know

Mercury General, the fifth-largest property insurer in the state, was given the green light by state regulators to increase its homeowners insurance policies by an average of 12 percent starting in late March. The move, according to filings with the California Department of Insurance (CDI), will impact 579,300 homeowners, condo owners and dwelling rental policyholders.

A total of 86,700 policyholders with Safeco, a subsidiary of Liberty Mutual, the fourth-largest insurer in the state, can expect rates to increase by an average of 7.2 percent in May, the San Francisco Chronicle reported. The company's rate hike will not affect condo owners or renters, as Safeco plans to drop all of its condo and rental policies statewide in 2026.

"During this time of increasing risk and volatility, we are building a sustainable business path forward in California by simplifying our product offerings and investing in the areas where we can win in the long term," a Liberty spokesperson said in a statement in December. The company specified it will continue offering new homeowner policies in the state.

The rate changes will be different for each policyholder. Rates will increase by an average of 12.3 percent for homeowners with Mercury policies, while they will go up by an average of 9.4 percent for condo owners and 7.5 percent for rental dwellings. Liberty Mutual customers could see rate hikes between 2 percent and 15 percent.

The increases are not linked to the recent devastating wildfires in Los Angeles County, the insurers said, though the blazes have likely caused significant losses to both insurers.

The emergency rate increase recently requested by State Farm, on the other hand, is related to the damages caused by the fires last month. The insurer, the largest in the state, asked for a 22 percent hike for homeowners, 15 percent for condo owners and 38 percent for renters. The request was rejected by California Insurance Commissioner Ricardo Lara this week, despite recommendations from his staff experts suggesting otherwise.

But while the commissioner may have shielded Californians from State Farm's requested emergency rate hike, most homeowners in the state will face higher premiums as a result of a $1 billion bailout for the state's insurer of last resort, the FAIR Plan.

What People Are Saying

A spokesperson for Mercury told KABC in Los Angeles: "Mercury filed for a homeowners rate increase in June 2024 to help offset increasing severity related to plumbing-related water losses and rising repair & construction labor and materials costs. This filing is not related to the recent Southern California wildfires. However, it was designed to allow Mercury to continue to provide high-quality homeowners insurance to a broad array of California consumers."

What Happens Next

California homeowners covered by Mercury General and Safeco can expect to see their rates increase at their next renewal after the rate's effective date.