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April 4, 2025

Wildfire threats cause major home insurers in California to make policy and pricing changes

Many providers are cutting coverage and increasing rates

Giljoon Lee • April 2, 2025

Giljoon Lee

As major insurers pull out or modify their pricing in California, the state’s homeowners worry about potential negative impacts. Photo illustration | Giljoon Lee. Source photos courtesy of Pexels | Used with permission

California wildfires have caused home insurance companies to become increasingly wary of providing or continuing service in the state, with many making various modifications to their regional policies. Read on to find out the modifications made by major home insurance providers in California that will impact homeowners. In 2023, those providers were, from biggest to smallest: State Farm, Farmers Insurance, CSAA Insurance Group, Liberty Mutual and Mercury Insurance.

State Farm

In May 2023, State Farm announced it will cease to accept new insurance applications in California due to “historic increases in construction costs outpacing inflation, rapidly growing catastrophe exposure and a challenging reinsurance market,” according to a press release.

In January 2024, the firm announced it would raise home insurance rates in California by an average of 20% that year. Then, in March, the company discontinued coverage for 30,000 homes and 42,000 apartments in the state after “careful analysis of State Farm General’s financial health,” according to a statement.

Following this trend, in the summer of 2024, State Farm requested Ricardo Lara, the Commissioner of the California Department of Insurance, to allow it to implement a 30% rate hike in price for homeowners, 52% for home renters and 36% for condominium owners. In California, the department must approve all changes to insurance rates before implementation. State Farm had been under financial distress due to the insurance claims paid in the aftermath of various recent wildfires in the state, and the move would, the company reasoned, “protect the insurer’s solvency.”

After the Palisades and Eaton Fires in early 2025, the company modified its request, with its executives writing a letter in February to Lara requesting approval to implement temporary increases in their pricing of 22% for homeowners, 15% for condo owners and 38% for rental dwellings. The request was initially rejected by Lara on Feb. 14, but after a closed-door meeting with State Farm representatives on Feb. 26, he “provisionally” approved it on March 14. If State Farm is able to provide data proving the request’s necessity in a public hearing scheduled for April 8, Lara will approve it.

“One of the biggest challenges I face as commissioner is balancing a stable and sustainable insurance market with effective oversight,” Lara wrote in an essay for the San Francisco Chronicle published after the announcement. “I am confident that my approach will provide Californians with greater choices in a competitive and stable insurance market — exactly what they deserve.”

Farmers Insurance

In July 2023, Farmers Insurance limited the number of new homeowners insurance policies in the state, citing “record-breaking inflation, severe weather events and reconstruction costs continuing to climb,” according to a statement by the firm. Later that year, in November, a subsidiary of the firm, Farmers Direct Property and Casualty Insurance Company, completely pulled out of California, affecting nearly 20,000 customers with home insurance. Most policyholders received alternative offers from companies under the same parent company. However, many of the offers may have had different terms compared to the original, including potential premiums.

In December 2024, Farmers announced it would increase the number of new home insurance policies it accepts each month in the state from 7,000 to 9,500. This was because “the state's insurance marketplace has indeed improved," Behram Dinshaw, the president of personal lines, said in a statement.

CSAA Insurance Group

CSAA Insurance Group, the northern insurance affiliate of AAA, has largely continued its operations in California without major changes, although in 2024 the company did not renew around 5,500 policies (1.2% of total policies in the state) due to wildfire risk.

In May 2024, CSAA announced around 448,000 customers in California will see their home insurance prices rise by as much as 23.3% (although some would see their rates decline by 11.3%). In total, the average rate of increase, the company said, would be 6.9%.

But unlike the attitudes of many other insurers in the state, the firm has expressed a positive outlook on the prospect of home insurance in the future. In an interview with the San Francisco Chronicle, its CEO, Mike Zukerman, said he believed California was still insurable.

“I don’t think there’s an alternative for us as a society and as an industry and as a people,” Zuckerman told the Chronicle. “Not being able to insure homes in California against these kinds of risks will completely upend the state.”

Liberty Mutual

Liberty Mutual Fire Insurance Company, a subsidiary of Liberty Mutual, declined to renew approximately 17,000 “dwelling fire insurance” policies in August 2024. The company claimed the move was in service of “retiring the antiquated technology it uses to manage” the policies, and not related to the wildfires at all. However, critics of the move, such as the nonprofit United Policyholders, still considered it to be a part of a larger trend of insurance companies moving out of the state.

“All they know is, ‘I’m losing my insurance and I didn’t do anything wrong,’” Amy Bach, the nonprofit’s executive director, told ABC7 News Bay Area.

Although initially, Safeco — another subsidiary of Liberty Mutual — was expected to continue the parent company’s presence in the California home insurance market, Safeco announced in December 2024 it would exit the state’s condo and rental insurance market by the beginning of 2026. Specifically, it stopped selling new insurance policies in January, and it will refuse to renew pre-existing policies beginning next year.

As of time of publication when a California zip code is inputted in the Liberty Mutual site’s home insurance quote search, the result simply reads, “The Liberty Mutual Insurance program is not available in your state.”

Mercury Insurance

Like CSAA, Mercury Insurance has largely continued its operations without major changes in the state. In fact, it has been one of the more proactive firms in reestablishing their presence in areas previously damaged by wildfires.

In March 2025, Mercury became the first major insurer to return to Paradise, Calif., the site of the 2018 Camp Fire that killed 85 people. The company attributed its return to Insurance Commissioner Ricardo Lara's Sustainable Insurance Strategy, a reform initiative aimed to address the issue of insurers pulling out of California in the wake of wildfires.

About the Contributor

Giljoon Lee, News Editor

Giljoon Lee is a junior and a news editor at El Estoque. He is also an editor and a co-PR Lead at La Pluma.