Allstate seeks 34% hike in California homeowner insurance premiums

Allstate has followed the lead of State Farm in seeking to hike California homeowners insurance premiums by a third to keep from going broke.

The Illinois-based insurer, the sixth largest in the state, is seeking to raise average policyholders rates by 34 percent, its steepest local rate hike in seven years, the East Bay Times reported. 

The increase would affect more than 350,000 homeowners, including nearly 70,000 across the Bay Area. A breakdown between home, condo and renter policies was not disclosed.

Allstate’s request to state regulators comes after insurers statewide have hiked rates by double digits. Last month, State Farm, the state’s largest insurer, asked the 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.

State Farm employed a rarely used “variance request” to allow the firm to boost its prices more than normally permitted “in order to protect the insurer’s solvency.”

In a statement, Allstate said the proposed rate hike is necessary to cover higher insurance payouts due to more frequent wildfires and severe weather events, growing repair costs during inflation and “legal system abuse.” Allstate last raised rates by 4 percent in September.

In the Bay Area, homeowners in fire-risk areas — including the hills of western Santa Clara County and inland parts of the East Bay and North Bay — would see the largest hikes.

Under Allstate’s proposed increase, most policyholders across the state would see their premiums jump between 20 percent and 40 percent, according to the newspaper.

Between 5,000 and 7,000 homeowners would see their rates double or climb even higher.

A few thousand others would get a rate reduction, some by as much as 60 percent, when the insurer updates its wildfire modeling system.

On average, California homeowners pay $1,453 a year for the most common type of coverage, according to Bankrate.com.

Allstate’s requested rate increase would boost premiums by hundreds, or thousands, of dollars, depending on the specific rate hike and the price of a homeowner’s current coverage.

The state Department of Insurance is now reviewing Allstate’s rate request. “Insurance rates must be justified to ensure policyholders do not pay any premiums that are excessive,” the department said in a statement.

It’s not yet clear when the new rates could be approved. Consumer Watchdog has filed an appeal of the proposed increase, asking why Allstate believes the rate hikes are warranted.

That means Allstate, Consumer Watchdog and the Department of Insurance could soon reach a deal on a potentially lower rate hike. 

But if the groups fail to come to an agreement, regulators would begin holding public hearings to make a final determination on Allstate’s request, a process that would likely take months.

— Dana Bartholomew

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