The approved adjustment is significantly lower than the6.99% increase Farmers originally requested last year. State officials say the agreement also requires the insurer to expand coverage in wildfire-prone regions where many homeowners have struggled to obtain insurance.

California's home insurance market has faced mounting pressure in recent years as insurers contend with rising wildfire losses, rebuilding expenses, and higher reinsurance costs. Several major insurers previously reduced or paused new business in high-risk parts of the state, pushing more residents toward the California FAIR Plan, the state-backed insurer of last resort.

According to the California Department of Insurance, Farmers insures roughly 11% of homes statewide, making it the second-largest home insurer in California behind State Farm General. The company had already limited new policies in 2023 before reopening all lines of business after the Sustainable Insurance Strategy reforms were implemented last year.

Farmers Rate Increase Approved Under New California Insurance Reforms

The rate increase will take effect for policy renewals after Sept. 15, 2026. While the statewide average increase is set at 1.5%, some homeowners may experience larger increases while others could see lower premiums depending on discounts and wildfire mitigation efforts.

According to reporting from the San Francisco Chronicle, Farmers initially submitted a request for a 6.99% increase in November before regulators approved the smaller adjustment. The filing marked the company's first under Insurance Commissioner Ricardo Lara's Sustainable Insurance Strategy, which allows insurers to incorporate future catastrophe risks and reinsurance costs more directly into pricing models.

Farmers said the revised rating plan includes expanded discounts for customers who bundle home and auto insurance policies. The company will increase its bundling discount from 15% to 22%.

In a statement, Behram Dinshaw, president of personal lines insurance at Farmers, said the company continues to see "encouraging signs" that California's insurance market is improving. He added that the insurer wants to remain positioned for growth and expanded coverage offerings in the state.

The company also announced broader discounts for homeowners who take steps to reduce wildfire risks on their properties. According to Farmers, customers who bundle home and auto coverage would generally experience lower rates despite the overall statewide increase.

Insurers Expand Policies as Wildfire Risks Reshape the Market

As part of the approved filing, Farmers committed to issuing at least 5,596 new policies over the next two years in areas designated by the state as "distressed" markets. These communities have elevated wildfire exposure and a high concentration of homeowners relying on the FAIR Plan.

According to the Chronicle, Farmers said it had already begun contacting homeowners in distressed regions earlier this year and reported nearly a10% increase in new business there compared with the previous year.

Other insurers have also sought or received rate increases under the Sustainable Insurance Strategy. Providers including Mercury Insurance, CSAA, and USAA obtained approval for 6.9% homeowners insurance increases in 2026.