Today, California Insurance Commissioner Ricardo Lara has rebuffed State Farm’s request for emergency premium increases, potentially setting the stage for a significant confrontation with the state’s largest insurance provider, outpacing the recommendations from his team of experts.

Lara, who has been advocating for insurance firms to resume writing policies in California despite rising wildfire threats, has communicated to State Farm executives that he requires further data before he can sanction such increases. He has also invited them to attend an informal conference at the Insurance Department’s Oakland office on February 26 to provide clarity on the matter.

“It is up to State Farm to prove that an interim rate increase is necessary under the current circumstances,” states the commissioner in his correspondence. “My objective is to ensure that policyholders are not burdened with higher costs unnecessarily. In light of the recent wildfires in Los Angeles, it’s essential for State Farm’s clients to receive clear explanations regarding their premium increase requests and the accountability of the company’s leadership in managing its financial health.”

In response, State Farm issued a statement today expressing disappointment that the commissioner overlooked his department’s recommendation for the essential approval of interim rate increases. They noted that the company has been proactive in addressing the queries posed by the commissioner.

When CalMatters reached out to inquire about State Farm’s participation in the forthcoming meeting, spokesperson Steve Baldwin replied, “We acknowledge the commissioner’s letter and the upcoming meeting; however, we have no further comments at this moment.”

Recently, State Farm sought to implement interim rate increases averaging 22% for homeowners, 15% for renters, and 38% for condominium owners, citing claims payouts of $1 billion due to the Los Angeles fires, with an expectation of substantially more to come. They intended to raise premiums starting in May.

Prior to this interim request, State Farm was awaiting the approval of its rate increase applications submitted last year.

Lara, in his message, acknowledged that his team had previously recommended approving State Farm’s request, but emphasized, “My primary responsibility lies with the residents of California.”

In his correspondence, Lara outlined his queries, including what factors have shifted since State Farm’s last submission and what other strategies the company is pursuing to enhance its financial standing besides increasing rates. He also inquired whether State Farm’s parent company could offer assistance and how satisfying their current request might impact the firm’s ongoing decision not to issue new policies in California, a move followed by a non-renewal decision for tens of thousands of customers last year.

In the letter, Lara referenced prior approvals granted to State Farm, which included rate increases of 6.9%, 6.9%, and 20% in the years 2022, 2023, and 2024, respectively. “Given that there were no catastrophic wildfire losses in 2022 and 2023, how does State Farm justify the notable decline in its policyholder surplus?” he queried.

Dan Krause, CEO of State Farm General—the California segment of State Farm Group—communicated in a February 3 letter to Lara that the company maintains nearly 3 million policies in California, which includes 1 million homeowners’ policies. He requested that the commissioner forgo the standard hearings required by law when insurers seek rate increases exceeding 7% and face opposition from an intervenor, arguing that “the stakes are too high for State Farm’s clients and the broader market to delay any rate increases due to lengthy hearings or related resolutions.”

The insurance department’s recommendation to approve State Farm’s requested rate increases included stipulations for refunds if subsequent department approvals resulted in lower rates than those granted temporarily.

Lara has indicated that the upcoming meeting with State Farm executives will also include Consumer Watchdog, the organization that intervened during the company’s previous rate requests.

In a recent press release, Consumer Watchdog urged the commissioner to deny State Farm’s request for interim rate hikes, accusing the company of “misleading its policyholders regarding its financial stability.”

The consumer advocacy group expressed mixed feelings about the commissioner’s recent actions, emphasizing that he must adhere to the law and conduct a public rate hearing.

“The Commissioner is justified in seeking greater transparency regarding State Farm, which has consistently resisted providing the requested information,” noted Pam Pressley, an attorney for the group. “Nonetheless, all outstanding issues should be addressed in a formal hearing that allows for official discovery and due process.”

Despite reservations about the process, Consumer Watchdog plans to attend Lara’s meeting on February 26, with President Jamie Court stating, “We will seize every opportunity to present our case, even if we disagree with the procedures.”

Insurance department spokesperson Michael Soller commented that a public rate hearing is mandated “only in cases where the involved parties do not reach an agreement,” noting that Consumer Watchdog is actively involved in these private discussions during rate assessments.

In recent years, many property owners in California have faced challenges regarding both the availability and affordability of insurance, as companies have ceased renewing policies or writing new ones due to wildfire risks and inflation. Numerous homeowners have turned to the FAIR Plan, a state-mandated coverage pool that provides fire insurance for those unable to obtain it elsewhere.

Recently, Lara approved a $1 billion funding request from the FAIR Plan, which was at risk of depleting its financial resources while settling claims from the Los Angeles-area fires. The member companies involved carry responsibility for the total amount and are expected to employ their new capability of charging a one-time fee to try to recuperate half of that sum from their clients.

Last year, the commissioner initiated a comprehensive strategy to tackle the insurance accessibility issues within the state, which came into effect at the beginning of 2025, just before the recent wildfires in the L.A. area.