Travelers Insurance will hike its premiums by an average 15.3 percent for hundreds of thousands of homeowners in California ahead of anticipated wildfire risk this summer.
The New York-based firm, the sixth largest insurer in California, plans to update rates for 320,320 homeowners, with some seeing increases of more than 25 percent, the San Jose Mercury News reported, citing filings with the state Department of Insurance.
It’s not known where in the state homeowners will see the largest increases, which could take effect as early as June 24.
On average, California homeowners pay $1,452 a year for homeowners’ coverage, according to Bankrate.com. The Travelers hikes could cost homeowners hundreds of dollars more a year.
California’s insurance rates are highly regulated, and far lower than many other states.
The insurance industry, citing a series of destructive wildfire seasons and rising building costs, has for years argued the rate regulations are untenable, according to the Mercury News.
Many of the state’s largest insurers, including State Farm and Allstate, have ended coverage for tens of thousands of homeowners in fire-risk areas, including the Santa Cruz Mountains and Wine Country.
Last year, they paused writing new policies across the state, even as companies won approval from regulators for double-digit rate hikes.
“Nobody wants prices to go up, but anybody who’s not a climate change denier knows that the risks are going up,” Edan Cassidy, an insurance broker in Scotts Valley in Santa Cruz County, told the Mercury News.
In a filing with the state insurance department explaining the need for a rate increase, Travelers cited “inflationary pressures” on construction costs, arguing that current pricing models don’t account for the damage expected from “changing climate conditions.”
“The approved adjustments to our California homeowners insurance rates are necessary to align pricing to the risks that our customers are facing,” the company said in a statement.
Initially, Travelers had asked the state to raise homeowners’ rates by an average of 21.7 percent.
But earlier this month, Consumer Watchdog reached an agreement with the company to slash the hikes by more than 6 percent — saving policyholders an average of $118 on their premiums, or $37.8 million in total, according to the consumer advocacy group.
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To stabilize the state’s troubled home insurance market, regulators have began a yearlong overhaul of home insurance rules and pricing.
The goal is to give insurers additional latitude to raise premiums to account for more frequent catastrophic fires while extracting commitments to extend coverage in fire-risk areas, according to the newspaper.
“Under outdated rules, the growth of climate-driven mega fires has supercharged insurance costs for many Californians while making insurance harder to find,” Insurance Commissioner Ricardo Lara said in a statement announcing some of the planned reforms in March.
— Dana Bartholomew