Allstate has approved raising California home insurance rates

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(Bloomberg) –Allstate Corp . is set to raise home insurance rates for California customers by an average of 34.1 percent, marking the biggest premium increase for a major insurer in three years, as the state grapples with a homeowner insurance crisis from deeper and deeper.

The rate hike, which will take effect in November, will affect about 350,000 California policyholders. Some customers will face premium increases of up to 650 percent, while others could see their rates drop by as much as 57 percent, according to company filings.

The increase is part of broader upheaval in California’s insurance market, with top insurers such as State Farm, Farmers Insurance and others pulling out of the state, citing rising wildfire costs and regulations that have capped rate increases for decades. Allstate, which stopped issuing new policies to California homeowners in 2022, highlighted these growing financial risks when it first cut coverage.

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“Higher home values ​​and repair costs, along with more frequent and severe weather, mean higher payouts to help customers recover, so we need to adjust rates to better reflect the cost of protecting our customers,” he said. Allstate spokesman Michael Passman said in an emailed response to questions. The San Francisco Chronicle previously reported on the rate adjustment and said the previous biggest increase came in 2021, when Homesite Insurance was approved for a 38.2 percent increase.

The Allstate decision follows a series of rate hikes for other insurers, including State Farm, which is looking to raise its rates by another 30 percent after already securing a 20 percent increase earlier this year. The Insurance Department is still reviewing State Farm’s latest claim, with Insurance Commissioner Ricardo Lara expressing concern about the insurer’s “financial condition.”

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Rising premiums and reduced coverage are exacerbating California’s housing affordability crisis and prompting more homeowners to turn to the state’s FAIR plan, the insurer of last resort.

In an effort to stabilize the market, Lara is pushing for reforms to allow insurers to factor in the costs of climate change and reinsurance when setting rates. Instead, insurers should offer more cover in fire-prone areas, according to the commissioner.

Consumer Watchdog, an advocacy group that challenged Allstate’s new rate hike, in a blog post criticized the insurer for failing to disclose the computer model used to determine fire risk surcharges. As part of the negotiations, Allstate agreed to introduce new wildfire reduction discounts for homes that are fire protected and to disclose how much a wildfire risk score contributes to premiums.