Allstate got the nod to jack up homeowners’ insurance rates across the state by more than a third in areas prone to wildfires.
The Illinois-based insurer, the sixth largest in the state, will raise home insurance premiums by an average 34.1 percent as the state faces a deepening property insurance crisis, Bloomberg reported.
The rate hike, beginning in November, will affect 350,000 policyholders — some facing premium increases of up to 650 percent, while others may see their rates drop by as much as 57 percent, according to company filings.
The insurance company had sought the rate increase in July, the biggest jump in premiums for a major insurer in three years.
Without the boost in home insurance prices, Allstate faced the risk of going broke, company officials said.
Allstate’s request to state regulators comes after insurers statewide have hiked rates by double digits.
In June, State Farm, the state’s largest insurer, asked the state Department of Insurance to allow the firm to raise insurance rates by an average of 30 percent for homeowners, 36 percent for condominium owners and 52 percent for renters.
The department is still reviewing the request from the state’s largest insurer, with Insurance Commissioner Ricardo Lara expressing concerns about State Farm’s “financial condition.”
Top insurers like State Farm, Farmers Insurance and others have pulled back from the state, citing the escalating costs of wildfires and regulations that have capped rate hikes for decades.
Allstate, which stopped issuing new homeowner policies in California last year, pointed to these growing financial risks when it first paused coverage.
“Higher home values and repair costs coupled with more frequent, severe weather lead to higher payments to help customers recover, so we need to adjust rates to better reflect the cost of protecting our customers,” Allstate spokesperson Michael Passman told Bloomberg in an emailed response to questions.
The previous larger increase was in 2021 when Homesite Insurance was approved for a 38.2 percent hike, according to the San Francisco Chronicle, which had earlier reported the rate adjustment.
The rising premiums and declining coverage are widening the affordability gap in California’s housing market, while forcing more homeowners to turn to the state’s FAIR plan, the last-resort insurer.
In an effort to stabilize the market, Lara is pushing for reforms that would allow insurers to factor in the costs of climate change and reinsurance when setting rates. In return, insurers would be required to offer more coverage in wildfire-prone areas, according to the commissioner.
Consumer Watchdog, an advocacy group that challenged Allstate’s new rate increase, criticized the insurer for not disclosing the computer model used to determine surcharges based on wildfire risk.
As part of the negotiations, Allstate agreed to introduce new wildfire mitigation discounts for homes that are buttressed against burning, as well as disclose how much a wildfire risk score adds to premiums, according to Bloomberg.
In July, the East Bay Times reported most Allstate policyholders across the state would see their premiums jump between 20 percent and 40 percent, with between 5,000 and 7,000 homeowners seeing their rates double or climb even higher.
— Dana Bartholomew
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