Sacramento, California – California homeowners may face higher insurance bills in 2026 after state regulators approved rate increases for two major insurance providers, a move officials say is intended to stabilize a home insurance market that has struggled for years amid wildfire losses and insurer pullbacks.
State Approves Rate Increases Under Insurance Stabilization Plan
In December 2025, the California Department of Insurance approved a 6.9% rate increase for Mercury Insurance and CSAA Insurance Group as part of the state’s Sustainable Insurance Strategy. The initiative is designed to encourage insurers to remain active in California after years of reduced coverage offerings and paused new policies.
The approval allows insurers to adjust rates while requiring them to expand policy availability, particularly in regions where homeowners have struggled to secure coverage.
Mercury Insurance Customers Could See Significant Changes
Under the agreement, Mercury Insurance committed to issuing more than 6,000 new home insurance policies over the next two years, with plans to add over 38,000 additional policies long term. Beginning in July, approximately 650,000 Mercury policyholders could experience rate adjustments.
According to reporting by the San Francisco Chronicle, customer rate changes may vary widely, with some homeowners seeing reductions of up to 10%, while others could face increases as high as 60%.
In an August 2025 statement, Mercury defended the increase, saying it stepped up while other insurers pulled back from the California market.
“As other companies scaled back their California operations, Mercury stepped up to provide more options for our agents and customers,” the company said, adding that it remains committed to protecting California residents.
CSAA Rate Increases Begin in March
CSAA Insurance Group will raise home insurance rates by up to 10% for more than 481,000 homeowners across Northern and Central California starting in March. As part of the approval, CSAA agreed to offer insurance quotes to select AAA members in Northern California.
State officials say the move is intended to reduce pressure on California’s insurer of last resort by transitioning eligible homeowners into private-market policies.
California FAIR Plan Enrollment Continues to Surge
The California FAIR Plan, which provides basic fire insurance coverage when homeowners cannot obtain private insurance, has seen rapid growth in recent years.
Once used mainly by residents in wildfire-prone regions, the FAIR Plan has expanded sharply as natural disasters and insurer withdrawals have affected broader parts of the state.
By the end of 2025, the FAIR Plan added more than 21,000 new policies between September and December alone. In total, over 646,000 homeowners were enrolled statewide, according to FAIR Plan data.
Compared to 2022 enrollment levels, participation in the FAIR Plan has increased by more than 140%.
Rising Costs and Financial Strain on the FAIR Plan
Since December 2025, California homeowners have paid over $1.96 billion in FAIR Plan premiums, highlighting the financial scale of the state’s last-resort coverage system.
Insurance officials have warned that heavy reliance on the FAIR Plan could create long-term sustainability challenges if more homeowners are unable to return to the private insurance market.
Insurers Say Reducing FAIR Plan Dependence Is Key
CSAA executives say expanding access to traditional insurance coverage is critical to stabilizing California’s system.
“Reducing reliance on the FAIR Plan is critical to its success,” said Ryan Vigus, executive vice president of Personal Lines at CSAA Insurance Group. “We’re working diligently with the Commissioner and the Department to make coverage more accessible to homeowners across the state.”
State regulators say additional rate filings and insurer commitments are expected in 2026 as California continues efforts to rebuild a functional and competitive home insurance market.
