Consumer Watchdog Critiques Farmers Insurance for Rate Hikes Amid Policy Losses in California

In a recent analysis, Consumer Watchdog has taken a critical stance against Farmers Insurance, highlighting that their latest filing under Insurance Commissioner Lara's controversial "Sustainable Insurance Strategy" exemplifies significant loopholes within the regulation. This comes in light of a reported loss of more than 15,000 policies in areas deemed "distressed" and an overall decrease of nearly 60,000 policies since the introduction of the strategy in September 2023, while the insurer contemplates raising rates by as much as 65% for certain customers.

While Farmers Insurance claims they plan to increase the number of policies in distressed areas by 5,596, their application reveals a stark reality: a net loss of 15,225 policies in those areas, coupled with a total reduction of 59,806 policies across the board since the announcement of Lara's plan. This situation poses alarming questions about the effectiveness of the measures designed to ensure insurance availability and affordability in California, particularly for high-risk properties affected by wildfires.

Insurance Commissioner Lara's initiative aimed to help insurance companies raise premiums in exchange for a commitment to cover a greater number of at-risk policyholders. However, a probing report from The New York Times has uncovered that the loopholes within the regulation allow insurance providers to submit their rate hike proposals based on artificially lowered policy levels. In essence, this means companies might offload policyholders over a couple of years to make their current numbers appear more favorable, only to subsequently increase rates.

Farmers Insurance has proposed an average rate hike of 6.99%, which translates into varying impacts for policyholders — while some may experience decreases up to 20%, others could face increases that exceed 65%. Approximately 25,000 policies, comprising roughly 3% of Farmers' total policy base, are anticipated to jump significantly, posing further strain for those already challenged by increasing costs. Alarmingly, due to the proposed rate increases being less than 7%, they may bypass mandatory hearings that could otherwise scrutinize these hikes.

"Farmers' filing is Exhibit A for the loopholes in Lara's plan," stated Jamie Court, president of Consumer Watchdog. He indicated that the approval of such filings would not only permit steep rate increases for higher-risk policyholders but also results in diminished overall policy counts in California. As a result of the insurance companies' tactics, hundreds of thousands of policyholders have been pushed onto the FAIR plan in the past two years since the launch of Lara's strategy, which was intended to support more residents in at-risk areas.

The perspective that premium increases can be justified by a false narrative of greater coverage illustrates a significant disconnect in the current regulatory structure. The advocacy group is now calling for more stringent regulations that would hold insurance providers accountable for adequately covering those who fulfill established wildfire mitigation criteria.

This situation has seen the number of residential FAIR policies nearly double, growing from approximately 320,581 at the time of the regulatory announcement to 625,033 by September 2025, showing a profound shift in the insurance landscape amid rising concerns over wildfire risks and insurance affordability in California. The pressing need for clearer and more effective regulations is more evident than ever, as the ramifications of the current approach begin to unfold.

As it stands, the requirement for thorough oversight in the insurance rate-making process has never been more crucial. Consumer Watchdog's revelations about Farmers Insurance’s filing may only represent a fraction of a broader systemic issue that affects countless consumers in California as they navigate an increasingly volatile insurance market.