Allstate seeking 34% rate increase for California homeowners insurance

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 a 39.6% rate increase last year and in January amended its request to 34.1%, according to the insurance department.

“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,” the company said in a statement.

Allstate stopped writing new California homeowner insurance policies in November 2022, citing such challenges.

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.

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 last month that his department would closely scrutinize State Farm’s request.

On Thursday, the department said the Allstate rate filing was under review and included a “complex wildfire model,” as well as proposed discounts for homeowners who take steps to reduce fire risks on their property.

“The Department of Insurance’s top priority is to protect consumers. Under Prop. 103, insurance rates must be justified to ensure policyholders do not pay any premiums that are excessive,” the statement said.

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 proposition passed in 1988, providing 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.