Two California Insurers Plan to Raise Rates in 2026

Many California homeowners will pay higher rates for insurance this year.

In December 2025, California’s Department of Insurance approved a 6.9% increase for Mercury Insurance and CSAA Insurance Group, two of the state’s largest insurers.

The Department of Insurance approved the rate increase as part of the state’s Sustainable Insurance Strategy, which aims to “stabilize California’s insurance market that has been in shambles throughout the last decade,” as USA Today explains.

In other words, California wants to allow insurers to raise rates enough to avoid leaving the state but not so much that it causes an insurance affordability crisis.

Both insurers agreed to cover more California homes as part of the rate increase.

Mercury Insurance, for example, agreed to create more than 6,000 new policies over the next two years and more than 38,000 new policies long-term.

In exchange, Mercury Insurance has the opportunity to raise rates on its 650,000 policyholders statewide.

CSAA, meanwhile, could raise rates on its more than 481,000 homeowners across northern and central California. As part of the approval, CSAA agreed to offer quotes to certain AAA members in Northern California with the goal of reducing the region’s reliance on California’s FAIR Plan.

Homeowners Could See Rates Decrease by 10% or Rise by 60%

If you paid $1,500 for homeowners insurance this year in California with CSAA or Mercury Insurance, you could pay anywhere from $1,350 to $2,400 next year.

According to the San Francisco Chronicle, some homeowners will see rates drop by 10%. Others will see rates rise by 60%.

CSAA will also introduce a way for Californians to reduce homeowners insurance premiums: CSAA’s “My Home Hardening” program, for example, will give homeowners a discount of up to 12.5% for proactively reducing wildfire risk. Successful homes will earn a Wildfire Prepared Home designation.

California Aims to Stabilize Long-Term Insurance Industry

California is strategically raising rates to stabilize the state’s insurance system.

The Golden State’s Department of Insurance aims to reduce reliance on the FAIR Plan, for example, which is California’s insurer of last resort. The not-for-profit insurance group covers homeowners who have no other options – say, homeowners living in fire-prone regions where insurers have largely withdrawn.

As natural disasters have become more common, the FAIR Plan has “grown exponentially,” according to one report. In the last few months of 2025 alone, the FAIR Plan added 21,000 new policies. Today, the plan covers around 646,000 homeowners with basic overage statewide.

Overall, FAIR Plan usage increased 140% between 2022 and 2025.

More Insurance Premium Increases Could Be Coming

Mercury Insurance and CSAA are the first two insurers with an approved premium hike under California’s new Sustainable Insurance Strategy.

The Department of Insurance could authorize more rate increases over the next few months.

State Farm, for example, has been asking to increase rates since June 2024. In 2025, the Department of Insurance authorized a rate increase – but it was less than State Farm had asked. State Farm argues rates need to continue rising for the company to remain competitive in California.

That means higher insurance premiums for California homeowners. Of course, the ultimate goal is to balance the state’s insurance industry:

“This is the kind of predictable, steady growth we need – a sharp contrast to the insurance companies walking away from Californians,” said California Department of Insurance Commissioner Ricardo Lara in a press release.

“We want more companies writing more policies so homeowners have more choices. That’s how we get people off the FAIR Plan and into the coverage they deserve.”

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