Allstate Seeking 34% Rate Hike on California Homeowners Insurance

Allstate is seeking an increase in its California homeowners insurance premiums by an average of 34%.

According to the California Department of Insurance, the Allstate homeowners filing was received by the Department on April 14, 2023. The initial rate request was 39.6%. Consumer Watchdog petitioned to intervene in July 2023. In January of this year, Allstate amended their rate request to 34.1%. According to a reports, it would be the largest rate increase this year and would impact more than 350,000 policyholders.

“This is a complicated rate filing where Allstate is switching complex wildfire models and introducing its wildfire mitigation discounts in compliance with the commissioner’s Safer From Wildfires regulation,” a CDI statement reads. “The rate filing is currently under review by the Department.”

The state’s insurance commissioner and other stakeholders have responded to a growing crisis in the state’s insurance market, one that seems to be driven in part by consecutive severe wildfire seasons in California, with myriad proposals. Modeling could be used in ratemaking under a proposal being considered by Insurance Commissioner Ricardo Lara, which is being supported by the insurance industry. It is among several steps proposed to help the state’s homeowners insurance crisis, which includes expedited rate filings and enabling insurers to factor reinsurance costs into rates.

U.S. Rep. Adam Schiff, a California Democrat who’s running for the Senate, is seeking to rein in soaring home insurance rates that he says are “gouging” his constituents with the Incorporating National Support for Unprecedented Risks and Emergencies Act, a new federal reinsurance option that he said would be cheaper than private alternatives. The bill would require participating insurers to offer comprehensive coverage for wildfires, storms and floods, among other risks. Schiff said he would model the proposal after the Terrorism Risk Insurance Act, which was implemented to help insurers recoup losses after the 9/11 attacks.

Allstate stopped issuing new California homeowners insurance policies in 2022, but it still insures many existing policyholders.

The carrier replied to a request for comment on its rate request with an emailed statement:

“Our payments to help California residents recover from accidents and disasters have increased significantly in recent years due to higher repair costs, more frequent and severe weather and legal system abuse.”

Allstate is among several carriers that have pulled back writing homeowners insurance in California in the last two years.

State Farm has applied for large rate increases in California, a year after the carrier got rate approvals of 7% and 20%. The insurer, the largest in California, insuring nearly one-in-five homes in the state, recently requested a 30% rate increase for its homeowners line, a 52% rate increase for renters and 36% rate increase for condo coverage. The rate hike would impact an estimated 1.2 million homeowners. Consumer advocates say the rates, if approved, would be “a financial blow to many renters and home and condo owners” in California.

Last year, State Farm announced it had stopped accepting new policy applications for property/casualty insurance in California due to increased risks from wildfires and inflation. More recently, State Farm said it would non-renew 30,000 California homeowners, rental dwelling, and other property insurance policies.

Tokio Marine America Insurance Co. and Trans Pacific Insurance Co., in April announced plans to withdraw from the wildfire-prone state entirely starting in July. In June, The Hartford confirmed it will discontinue writing new homeowners policies in California.

Other large carriers that have announced a reduced appetite for writing California homeowners insurance include American International Group (AIG) and Chubb.

A new report from Gallagher Re released late last year showed the threat of damaging wildfires in conjunction with inflation and pricing challenges has led to a distressed insurance and reinsurance market, particularly in California.