Allstate, one of California’s largest insurers, is set to raise rates by an average of 34.1% after receiving approval from the California Department of Insurance.
The rate hike would impact more than 350,000 policyholders statewide come November. Some customers will face premium increases of up to 650%, while others may see their rates drop by as much as 57%, according to company filings reviewed by Bloomberg.
Allstate is the state’s fourth-largest property and casualty insurance provider, representing about 5.5% of the overall market as of last year, according to the Department of Insurance.
The company’s latest price hike comes amidst a broader insurance problem in California. Some companies, including Allstate, stopped accepting new insurance property applications last year.
Others, like Tokio Marine America Insurance Co. and Trans Pacific Insurance Co., have decided to limit business in California altogether, halting new home and personal insurance applications.
In March, State Farm General Insurance Company announced plans to non-renew about 72,000 policies in California, which will impact property insurance and commercial apartment policies.
Last September, California Insurance Commissioner Ricardo Lara said he would write new rules allowing insurers to consider climate change when setting their rates. He has also pledged to consider regulations allowing them to consider some of their reinsurance costs.
The rules requiring insurance companies to get permission from the state to raise their rates would not change, according to the Associated Press.
The state will only let companies use these new rules if they write more policies for people who live in areas threatened by wildfires. This means companies must write policies in these areas for at least 85% of their statewide market share.
Some consumer groups, including the Consumer Watchdog, fear that allowing insurance companies to consider climate change in their rates will lead to dramatically higher coverage costs for homeowners.
Lara said insurance companies could also consider improvements that owners have made to make their homes more resistant to wildfires and the billions of dollars in public money that the government has spent to better manage forests and reduce wildfire risks, ultimately benefiting homeowners.
The rapid decrease in insurance companies offering services to California residents has resulted in many new and existing homeowners turning to California’s FAIR plan for coverage. The plan covers basic hazards but is described as a “temporary safety net” since it was never meant to replace insurance coverage companies can offer.
The state doesn’t require potential homeowners to have insurance; however, many mortgage lenders may require some proof of insurance as a loan condition.
Consumer Watchdog criticized the insurer for not disclosing the computer model used to determine surcharges based on wildfire risk in a blog post. Allstate’s rate increase proposal was initally challenged by the group, demanding the insurer provide more data.