Allstate is seeking to raise its California homeowners insurance premiums by an average of 34% — which would be the largest rate increase this year amid the state’s insurance crisis.
If approved by the state’s Department of Insurance, the rate hike would affect more than 350,000 policyholders and would exceed a 30% increase sought last month by State Farm, the state’s largest homeowners’ insurer.
The sixth-largest homeowners insurer in the state, Allstate first filed for the increase last year and it could be trimmed by state regulators.
Allstate stopped writing new California homeowner insurance policies in November 2022, citing the devastation caused by wildfires and rising reinsurance and home reconstruction costs.
The company has received approvals for several rate increases in recent years, including most recently a 4% bump in 2023.
The latest rate increase request, first reported by the San Francisco Chronicle, is being challenged by Los Angeles consumer advocacy group Consumer Watchdog, which is demanding the Northbrook, Ill., insurer provide more data.
“Allstate is using secret algorithms to decide whether homeowners are at high risk of wildfire and how much they will pay. We’re pushing the company to explain that pricing and disclose to consumers exactly what is raising their premiums,” said Carmen Balber, president of Consumer Watchdog.
Allstate did not respond to a request for comment.
The company is among multiple California home insurers that have pulled back from the market and sought rate increases in recent years, citing the rising severity of wildfires and other factors.
In its rate request last month, State Farm cited an obscure provision of the state insurance code that typically indicates an insurer is facing serious financial issues — even though State Farm received a 6.9% increase in January 2023 and a 20% boost that went into effect in March.
In March, State Farm announced that it would not renew 72,000 property owner policies statewide, joining Farmers, Allstate and other companies in either not writing or limiting new policies, or tightening underwriting standards.
Insurance Commissioner Ricardo Lara issued a statement at the time that his department would closely scrutinize the request.
The department did not respond to a request for comment Thursday on Allstate’s request.
With the support of Gov. Gavin Newsom, Lara is seeking to enact by years’ end the biggest reform of California’s insurance regulations since the 1988 passage of Proposition 103, which provided for an elected commissioner with authority to review rate increases sought by insurers.
A key element of his Sustainable Insurance Strategy, a package of executive actions, would allow insurers to include the cost of reinsurance they buy to protect themselves from catastrophes into the price of homeowners’ premiums. It also would allow them to include the potential costs of future wildfires as identified by complex computer models, instead of relying on past claims data.
The actions are intended to lure insurers back into the market. In April, an Allstate executive said at a state hearing that if the plan is adopted, the company would once again start writing new policies in California, assuming its approved rates were adequate.
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