In early January, Alex Markarian returned to his home in the Palisades and was thrilled to see it was still standing. Flames from the devastating 2025 Southern California wildfires had destroyed thousands of structures, including many of the houses directly across the street from Markarian’s home.
Yet while his home was still standing, nearly everything inside had been destroyed. Markarian — who’s been insured by State Farm for 15 years — was expecting his insurer to pay for the damages, but it’s been several months and he still hasn’t received much of the money he was expecting. Making matters worse, Markarian is now concerned about the state of his homeowners insurance policy.
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"I am worried about keeping home insurance after this is all said and done," Markarian shared with CBS News. "Will State Farm, or any insurance company, still insure us and, number two, will I be able to afford that insurance?"
The 2025 wildfires, which struck the Los Angeles metropolitan area as well as San Diego County in early January, created more than $250 billion in losses. And with the looming threat of more fires — combined with a few other environmental concerns including elevated earthquake risks — California property owners could soon face unprecedented challenges in finding affordable insurance coverage.
In fact, State Farm is now seeking to substantially raise its rates, while other insurers have already fled the state or scaled back operations.
State Farm’s case for raising premiums
State Farm is currently the largest property insurance provider in California, with close to three million active policies that account for 20% of the state’s homeowners market.
In February 2025, the insurer requested approval on a 22% rate hike for homeowners policies in California — since then, the firm has lowered its requested increase to 17%. State Farm is also requesting a 38% increase on rental-dwelling policies, which provide landlords with coverage, as well as a 15% increase on renters insurance.
Requiring legislative approval in order to raise rates, State Farm is aiming to convince lawmakers that the price hike is necessary after the insurer had already spent $2.75 billion in California wildfire claims, and expects to pay out around $7.6 billion in total. The California Department of Insurance supports State Farm’s request, although some consumer watchdogs have expressed concerns.
Since State Farm’s California subsidiary and its AA credit rating were recently placed on a “CreditWatch Negative” by S&P Global, the insurer’s claims of potential financial disaster may be valid. One of the attornies for the California Department of Insurance even compared the situation to the Titanic, saying there’s still time to turn the ship around despite the iceberg being within sight.
“If we don’t, three million Californians are going into the water, and there are not enough lifeboats,” attorney Nikki McKennedy shared with CNBC.
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California’s insurance market is in trouble
Unfortunately, concerns over State Farm’s financial troubles are just the tip of the iceberg when it comes to California’s insurance market as a whole. As CNBC reports, economist David Appel made it clear during State Farm’s administrative hearing that the insurance market in California, as it is now, is unsustainable.
Ricardo Lara, the state’s insurance commissioner, has reportedly been reluctant to approve rate hikes for both auto and homeowners insurance, leaving insurers to pay out more than they collect. This has led many insurance companies to stop offering policies to California residents — including State Farm, which has not written a new homeowners policy in the state since May 2023.
Allstate, American National, Farmers Insurance, Nationwide and Travelers are just a few of the many other insurance companies that have either scaled back or have completely stopped selling home and auto insurance policies in California.
The good news is Representative Adam Schiff (D-Calif.) has introduced legislation that aims to fix this dire situation.
One proposed law, the Incorporating National Support for Unprecedented Risks and Emergencies (INSURE) Act, would “create a federal catastrophic reinsurance program to insulate consumers from unrestrained cost increases by offering insurers a transparent, fairly priced public reinsurance alternative for the worst climate-driven catastrophes.”
Schiff has also proposed new tax breaks for California homeowners who take steps to protect their homes from disaster, which could reduce the catastrophic damage from adverse weather events.
Unfortunately, with Republicans holding the majority of seats in the U.S. House of Representatives, the likelihood of this legislation getting passed under the Trump Administration is low, as both programs would be costly.
Without a solution at the federal level, California homeowners could soon receive new rate increases from State Farm. And as homeowners insurance options in the state continue to dwindle, many Californians who may struggle with the upcoming cost of insurance may just be grateful for whatever coverage they can get.
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
