Following Wildfires, California Homeowners Face Insurance Rate Hikes As 660,000 Policies Get More Expensive

California’s devastating wildfires have pushed the state’s insurance crisis to new heights, with two major carriers announcing rate increases affecting 660,000 policyholders amid estimated fire damages exceeding $250 billion.

The fires, which claimed 28 lives and destroyed more than 15,000 structures across Los Angeles and Ventura counties, could become the costliest natural disaster in U.S. history, surpassing Hurricane Katrina’s $200 billion toll, according to the Los Angeles Times.

Mercury General MCY will raise rates by an average of 12% for 579,300 customers starting in March, while Safeco plans 7.2% increases for 86,700 policyholders in May, the San Francisco Chronicle reported. 

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The Palisades fire, sweeping through neighborhoods with median home values above $2 million, has displaced over 150,000 residents. AccuWeather estimates total damages between $250 billion and $275 billion.

“These fast-moving, wind-driven infernos have created one of the costliest wildfire disasters in modern U.S. history,” AccuWeather Chief Meteorologist Jonathan Porter told the Times.

Insurance companies face an estimated $35 billion to $45 billion in claims from the Palisades and Eaton fires alone, according to CoreLogic analytics.

State Farm, California’s largest insurer, recently sought emergency rate increases of 22% for homeowners, 15% for condo owners and 38% for renters, citing fire damages. Insurance Commissioner Ricardo Lara rejected the request.

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“Mercury filed for a homeowners rate increase in June 2024 to help offset increasing severity related to plumbing-related water losses and rising repair & construction labor and materials costs,” a company spokesperson told KGO-TV news in San Francisco. 

Safeco plans to discontinue all condo and rental coverage statewide by 2026, though it will continue offering new homeowner policies. Individual rate changes will vary, with Mercury customers facing increases between 7.5% and 12.3% depending on policy type, Newsweek reported.

The crisis deepens as California homeowners also face premium increases from a $1 billion bailout of the FAIR Plan, the state’s insurer of last resort.

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