Insurance giant removes monthly policy cap, requests 6.99% average rate increase

Farmers insurance The company has eliminated the cap on the number of homeowners insurance policies it offers in California, marking a significant step for a state that has been working to stabilize and rebuild its insurance market for years.

The insurer announced last week that it had removed the previous cap of 9,500 new policies per month due to expectations that there would be an improvement in the state’s homeowners insurance market under Commissioner Ricardo Lara’s Sustainable Insurance Strategy. Farmers first implemented a cap of 7,000 new home insurance policies per month in 2023 before the cap was lifted in 2024.

The cap was originally implemented because California’s deteriorating insurance climate forced other insurance companies to limit their business. Allstate suddenly stopped selling new homeowners insurance policies in November 2022, followed by State Farm, which stopped issuing new homeowners and many property insurance policies in 2023.

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Newly built single-family homes for sale in Encinitas, California, on July 31, 2019. (Reuters/Mike Blake)

Wildfire risks, housing rebuilding costs, and reinsurance costs rose much faster than insurers were allowed to raise rates, creating a bad environment for insurers to operate. State insurers need approval from the California Department of Insurance before raising homeowners insurance rates. However, residents paid the price, facing a host of problems caused by sharp increases in insurance premiums and limited coverage options. At the same time, millions of residents faced increased fear and uncertainty about maintaining coverage.

The rating plan, inspired by the insurer’s sustainable insurance strategy, is designed to expand its offerings to more homeowners throughout California, said Bahram Dinshaw, president of Farmers Insurance Personal Lines. This includes Farmers Smart Plan Home policies, Farmers Smart Plan Condominium policies, and Farmers Smart Plan tenant policies.

“By removing the cap on offering new homeowner policies, Farmers is doubling down on its commitment to California homeowners, Expanding selection and availability Dinshaw told consumers across the state.

The company also introduced a rating plan inspired by its sustainable insurance strategy that Dinshaw said is “designed to expand our offerings to more homeowners across California.”

This plan involves bringing at least thousands of new insurance policies to areas where people struggle to obtain insurance, known in the industry as “distressed” locations.

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A California judge’s controversial ban on home renovations has led many Beverly Hills elites to pause projects. (Istock)

Starting in early 2026, Farmers will market directly to about 300,000 people in those affected areas and will give local farmer agents more tools to help with outreach.

But as part of that plan, the company is simultaneously asking state regulators for permission to raise its rates by an average of 6.99% throughout California, which would likely result in higher premiums for most customers.

A price increase changes the basic pricing formula used by insurance companies and typically results in higher premiums, which is what customers pay.

However, the company also wants to increase the discount for customers who combine home and auto insurance policies from 15% to 22%.

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Farmers says they remain committed to helping “maintain an open and viable insurance market by continuing to offer new insurance policies to homeowners in the state without interruption.”

Beachfront homes are located on Miramar Beach in Montecito in Santa Barbara County on California’s Central Coast. (Nick Wheeler/Corbis via Getty Images)

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The insurance group has also resumed accepting new commercial insurance applications from clients seeking coverage for various industries and has reopened various manufactured home offerings from the leading insurer.