By Nadia Lopez | Bloomberg
Allstate Corp. will raise homeowners insurance premiums for California customers by an average of 34.1 percent, the biggest increase in premiums for a major insurer in three years as the state faces a worsening property insurance crisis.
The rate increase, which will take effect in November, will affect around 350,000 policyholders across California. Some customers can expect premium increases of up to 650 percent, while others can expect a reduction in their premiums of up to 57 percent, according to company documents.
The increase is part of a larger upheaval in California’s insurance market, with leading insurers like State Farm, Farmers Insurance and others pulling out of the state, citing rising wildfire costs and regulations that have limited premium increases for decades. Allstate, which stopped issuing new homeowners insurance in California in 2022, pointed to those growing financial risks when it first suspended insurance.
“Higher property values and repair costs coupled with more frequent severe weather events are leading to higher payments to help customers recover, so we must adjust rates to better reflect the cost of protecting our customers,” Allstate spokesman Michael Passman said in an emailed response to questions. The San Francisco Chronicle previously reported on the rate adjustment, saying the previous major increase came in 2021, when Homesite Insurance was approved for a 38.2% increase.
The decision on Allstate follows a series of rate increases by other insurers, including State Farm, which plans to raise its rates by another 30% after pushing through a 20% increase earlier this year. The Department of Insurance is still reviewing State Farm’s latest request, with Insurance Commissioner Ricardo Lara raising concerns about the insurer’s “financial health.”
Rising premiums and reduced coverage are exacerbating the affordability crisis in California’s housing market, prompting more homeowners to turn to the state’s FAIR Plan, the insurer of last resort.
To stabilize the market, Lara is pushing for reforms that would allow insurers to take the costs of climate change and reinsurance into account when setting premiums. In return, insurers would have to offer more coverage in areas at risk of wildfires, according to the commissioner.
Consumer Watchdog, an advocacy group that has challenged Allstate’s new rate increase, criticized the insurer in a blog post for not disclosing the computer model it uses to calculate surcharges based on wildfire risk. As part of the negotiations, Allstate agreed to implement new wildfire mitigation discounts for homes that are fire-strengthened and to disclose how much a wildfire risk score affects premiums.
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