California Residents Face Insurance Costs Going up Over 50%

After announcing it won't renew coverage for 72,000 properties across California only a few months ago, State Farm is delivering another blow to policyholders in the Golden State by seeking to increase its premiums by as much as 52 percent.

The insurer accounts for 8.7 percent of all home insurance policies in California, according to 2022 data cited by the San Francisco Chronicle. State Farm has asked the state government permission to raise its rates by 30 percent for homeowners, 36 percent for condo policies, and 52 percent for renters' policies. The increases sought by State Farm are in its filing to the state Department of Insurance, NBC Los Angeles reported.

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California homeowners currently pay an average annual insurance premium of $1,453, according to Bankrate.com—lower than in many other states, especially those facing the same type of climate-related threat. In Florida, for example, the average annual premium is $5,533.

While California's strict legislation shields home insurance policyholders from massive rate hikes, homeowners in the state have still seen a spike in premiums in recent months as insurers cut coverage in the areas most vulnerable to extreme weather events. State Farm's request for such large rate hikes is likely to exacerbate the state's property insurance crisis, impacting an estimated 1.2 million homeowners.

In a statement to NBC Los Angeles, State Farm said that "rate changes are driven by increased costs and risk and are necessary for State Farm General to deliver on the promises the Company makes every day to its customers." It added: "We continue to look for ways to maintain competitive rates and help our customers manage their risk."

This chart, provided by Statista, shows California zip codes where insurer State Farm is discontinuing the highest shares of homeowners insurance (in percentage).

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The Illinois-based insurer is likely trying to protect itself from huge losses linked to the increased risk of devastating wildfires in the state. State Farm reported net losses of more than $6 billion in the past two years amid a "significant increase in homeowners incurred catastrophe claims," as the company wrote in February.

The rate increases sought by State Farm need to be officially approved by the California Department of Insurance (CDI) before the company can implement them. The department's decision might take several months.

Newsweek reached out to State Farm and the CDI for comment via email on Tuesday morning.

A CDI spokesperson told Insurance Journal that State Farm's request for rate increases raises "serious questions about its financial condition. This has the potential to affect millions of California consumers and the integrity of our residential property insurance market."

Are you a California homeowner covered by State Farm? Let us know how you feel about the sought rate increases by contacting g.carbonaro@newsweek.com.