State Farm Customers in California Could See Refunds After 2025 Wildfire-Related Rate Hikes

State Farm customers in California may soon see some relief after being hit with rate hikes following the 2025 Wildfires.

After the Los Angeles wildfires last year, many insurance companies hiked their rates in the Golden State.

But now, a proposed settlement could spare some State Farm policyholders from further premium increases and provide refunds to others.

Previously, State Farm—the largest insurer in the state—sought a 30% rate hike for homeowners. But the consumer advocacy group Consumer Watchdog questioned the rate increases State Farm asked for.

Now, the California Department of Insurance, Consumer Watchdog, and State Farm have reached a three-party settlement agreement in an administrative rate hearing proceeding.

“This rate hearing process reflects the strength of California’s transparent and long-standing consumer protections,” said Michael Soller, deputy commissioner for communications and press relations at the California Department of Insurance, in a statement. “Our department’s role is to carefully review the data and hold insurance companies accountable so Californians are not paying more than is justified.”

"State Farm originally sought staggeringly massive increases that were not supported by the data. This settlement substantially reduces those requests, secures refunds for some policyholders, and includes additional protections affecting nonrenewals, claims oversight, and future rate review," Consumer Watchdog litigation director William Pletcher said.

Details of the proposed settlement

Under the agreement, homeowners’ rates will remain at the previously approved interim increase of 17%, rather than rising to the 30% State Farm had requested.

Condo owners who experienced interim rate hikes of 15% will see those increases reduced to 5.8% and will receive refunds, with interest, dating back to June 1, 2025.

Rental unit owners who faced interim hikes of 38% will see those increases lowered to 32.8% and also receive refunds with interest.

Renter policyholders, however, will see rates rise 15.65%—slightly above the interim 15% increase.

In addition, State Farm has agreed not to cancel any new policies this year, and to continue coverage for certain policies previously slated for nonrenewal in wildfire-affected areas.

"Many Californians are worried about home insurance right now," State Farm spokesperson Tom Hartmann tells Realtor.com®. "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," Hartmann adds.

State Farm has received more than 13,500 claims and issued over $5 billion in payments to families whose homes, cars, and property were damaged or destroyed in the wildfires, according to Hartmann.

Settlement still awaits the judge’s approval

According to Harvey Rosenfield, founder of Consumer Watchdog, the outcome underscores why California voters set up a process that permits independent consumer participation in insurance rate cases.

"When consumer advocates are able to challenge the data and present their own analysis, excessive requests are reduced and consumers are protected," Rosenfield said in a statement. "This settlement demonstrates how that public oversight works in practice. In this case, that oversight helped reduce State Farm's requested increases by roughly $530 million."

Consumer Watchdog says the deal will provide $35 million in refunds to policyholders, plus interest, and cut more than $492 million from the rate increases State Farm initially sought.

The agreement, which still needs approval from an administrative law judge, also calls for additional scrutiny of State Farm’s rates in 2027. The company must also offer a one-time 2.5% premium discount to renewing policyholders if its ratio of premiums to available cash reaches a specified threshold.

The judge is expected to rule on the settlement by April 7, after which Insurance Commissioner Ricardo Lara will review the decision and have the final say.