Farmers Insurance Farmers lifts cap, requests rate increase

• Recently, Farmers — which is California’s second-largest home insurer — announced it is removing its previous cap on new homeowners policies in the state.
• The cap removal is effective immediately. The cap had previously limited Farmers to issuing 9,500 new policies per month.
• At the same time, Farmers has filed a new rating plan with the California Department of Insurance (CDI), asking for an average statewide rate increase of 6.99%.
• Their plan will apply to homeowners, condominium and renters policies under their “Smart Plan” offerings.
• The change comes after the state adopted a regulatory approach via the Sustainable Insurance Strategy, promoted by the state’s insurance commissioner. Under this strategy, insurers get more flexibility — e.g., to use forward-looking wildfire risk models and reinsurance cost in underwriting, which might encourage insurers to re-enter markets they previously avoided.

What this means practically: for many Californians, it may become easier to get homeowners or renters insurance from Farmers — especially in places where insurance choices have been limited. But it could also mean paying more in premiums, as the company seeks approval for higher rates.

Why Farmers is doing this: Pressure, wildfire risk, and a fragile insurance market

To understand Farmers’ move, it helps to consider the broader context.

1. Wildfires and increasing catastrophe risk

• California has faced increasingly frequent and severe natural disasters — especially wildfires — which have substantially raised the risks for property insurers. Many insurers have responded by scaling back or exiting the state’s homeowners market.
• For insurers, wildfire risk — combined with rising construction costs (for rebuilding, repairs, materials) and growing reinsurance costs — has made insuring homes in much of California much more expensive, and unpredictable.

2. Insurance market pressure and past pullbacks by insurers

• Over recent years, many major insurers either stopped writing new policies in California or limited new business. That reduced competition and made it harder for homeowners to find coverage.
• For example, several big-name insurers had pulled back from offering new home or condo policies — which left many potential homeowners or renters with few private-market options.

3. Regulatory change: Sustainable Insurance Strategy

• The “Sustainable Insurance Strategy” is the backdrop for Farmers’ move. Under this approach, regulators are allowing insurers to factor in forward-looking wildfire risk modeling and reinsurance costs when setting premiums — a shift from traditional methods.
• The idea is to make the insurance market more viable and stable, encouraging insurers to write new policies again — including in areas that insurers had earlier considered too risky.
• Farmers says the cap removal and new pricing plan reflect its belief that the homeowners insurance market in California is improving under this new regulatory environment.

Who wins — and who worries: Potential impacts

Possible benefits for homeowners and prospective buyers

• Greater availability of insurance: For people in parts of California where many insurers stopped writing new policies or imposed strict limits, Farmers’ move could restore access to private insurance. This could make buying a home or renting more feasible, or help those who previously couldn’t get coverage.
• More choices, competition returns: The re-entry of a big insurer like Farmers may encourage other companies to follow suit — which could increase competition, variety of offerings, and potentially slow premium increases over time (depending on risk).
• Support for “distressed areas”: The plan mentions targeting “distressed areas” (as identified by the CDI) for expanded coverage. For residents in such communities, this could provide a lifeline, especially in places where insurance access had nearly dried up.

But consumer advocates and watchdogs raise serious concerns

Not everyone is convinced this is a win for consumers. Some critics argue the changes benefit insurers more than homeowners — and may leave many people worse off than before.

• According to Consumer Watchdog (and related reporting), while Farmers claims it will expand coverage in distressed areas, its own recent filing shows a net loss of policies: about 15,225 policies lost in distressed areas and approximately 59,800 policies overall.
• In exchange for this reduction, Farmers is seeking rate increases — and some customers may face rate hikes as high as 65%, particularly those in high-risk or previously “dumped” areas.
• Critics argue this creates a loophole: insurers might shrink their base (drop or non-renew policies) ahead of reforms, then when regulation loosens, re-enter the market under more favorable terms. That could leave many long-time homeowners without coverage, pushed toward more expensive or limited state-run plans such as the California FAIR Plan.
• There are concerns that, despite the rhetoric about “expanding access,” many former policyholders may find themselves with fewer — or more expensive — options than before. Consumer groups suggest the regulatory changes may effectively enable insurers to “reset” their business in California at the consumers’ expense.

What this means if you own — or want to buy — a home in California

If you are (or plan to become) a homeowner, renter, or condominium owner in California, this shift in policy by Farmers is important to pay attention to. Here’s what to consider:

• You might have more access to private insurance again — especially if you're in an area where insurers had pulled out. It could mean more choices and possibly better terms, depending on underwriting.
• But you may pay more — if your home is in a higher-risk area (e.g. wildfire-prone zones) or if you switched insurers in the past few years, the new pricing may reflect higher risk and reinsurance costs.
• It’s worth shopping around — since Farmers is re-entering the market, you might want to get quotes, compare coverage levels, and check whether your area is classified “distressed” or “high risk.”
• Read the fine print — as with any insurance policy, make sure you understand what’s covered: wildfire, natural disasters, rebuilding cost, and whether discounts (e.g. bundling home + auto) apply. Farmers’ new plan reportedly increases its home/auto discount to 22% (from 15%) if you bundle.
• Stay alert for regulatory and market changes — the insurance climate in California is in flux, with ongoing reforms meant to reshape how insurers price risk; what’s true today might shift again as wildfires, climate risk, and reinsurance markets evolve.

Bigger picture: Why this matters beyond one company

The developments at Farmers are a microcosm of a broader crisis — and possible restructuring — of homeowners insurance in California. Over recent years:

• Many major insurers either limited new policies or pulled out altogether from high-risk areas. The private insurance market has been under stress due to increased climate risk, rising costs of rebuilding (after disasters), and reinsurance costs.
• More homeowners have been forced toward the California FAIR Plan — a state-run program designed as a “last resort” for people who can’t get private coverage.
• Regulators are trying to respond by changing how risk is assessed and priced (through the Sustainable Insurance Strategy), with the goal of making private insurers willing to write policies again, even in riskier areas.

If Farmers’ strategy — raising rates but reopening the door to new policies — yields enough profit and stability, other insurers might follow. That could gradually rebuild a functioning homeowners insurance market in California — but perhaps at the cost of higher premiums and less security for high-risk homeowners.

It’s a difficult balancing act: market viability vs. affordability and fairness. For homeowners, it underscores the reality that in a climate-challenged world, insurance is no longer just a formality — it’s a negotiation with risk.

What critics want: Oversight, fairness, protections

Advocates such as Consumer Watchdog argue that reforms should include stronger protections for homeowners — especially those in high-risk zones. Their concerns and demands include:

• Transparency in policy-count calculations: Critics say insurers should not be allowed to shed policies (non-renew, drop clients) before reforms take effect, then count new policies toward “expansion” goals. That undermines trust and may leave many without coverage.
• Affordable rates for high-risk areas: As insurers factor in wildfire risk and reinsurance costs, premiums could spike — making insurance unaffordable for many. Advocates want reasonable caps or subsidies for vulnerable homeowners.
• Mandatory coverage requirements or incentives for mitigation: Some suggest that insurers (or the state) should support or require wildfire-resilience measures (e.g. fire-resistant building materials, vegetation management) to reduce risk and insurance costs.
• Continued regulation and public oversight: They warn that loosening regulatory constraints may favor insurers unless strong consumer protections remain, especially to protect long-term homeowners who might face sudden premium hikes or non-renewals.

In short — while reopening access to insurance is a good first step, without careful regulation and fairness, many homeowners may still end up exposed.

What to watch next

Over the coming months and years, several developments will determine whether this shift benefits Californians — or simply reshuffles risk and cost:

1. Will Farmers’ new plan get approved — and will new policies be issued widely? The 6.99% rate increase is a request; the regulatory approval process will matter. If regulators push back, or require additional safeguards, that could affect rollout.

2. Will other insurers follow Farmers’ lead? If more insurers re-enter the market, competition could improve availability and maybe moderate rate increases. If not, California might continue to see thin choices for homeowners, especially in risky areas.

3. How will wildfire and climate risk evolve — and how will insurance pricing adapt? As wildfires remain frequent and severe, insurers may continue to raise rates or tighten underwriting. The sustainability of the whole model depends on balancing risk — for both insurers and homeowners.

4. Whether regulators and lawmakers introduce further protections or reforms — such as rate-caps, mitigation incentives, or better oversight of insurer practices — especially in light of the concerns raised by consumer-advocacy groups.

The decision by Farmers Insurance to lift its cap on new homeowners policies in California — along with a request to hike rates — marks a significant shift in one of the most troubled insurance markets in the United States. On one hand, it potentially re-opens access to private insurance for many homeowners and renters who’ve struggled to find coverage. On the other, it raises serious questions about fairness, cost, and whether the burdens of climate-driven risk will end up falling heavily on ordinary people.

For homeowners and renters in California, the key takeaway is this: insurance is no longer just a background paperwork — it’s a major financial decision tied directly to climate risk, regulation, and market instability. If you live in a wildfire- or disaster-prone zone, or are buying/renting a home there, you’ll need to shop around carefully, understand what you’re getting, and stay alert to future changes.

Over the long run, whether this new chapter brings stability and protection — or simply shifts risks and costs — will depend on how insurers, regulators, and homeowners respond.