Allstate Looks To Increase Home Insurance Premiums By 34%

According to an insurance filing unveiled on Thursday, Allstate filed to raise California Insurance premiums in state by 34%, with the request currently remaining under review.

For over a year, insurance companies have been slowly limiting policies, ending the allowance of new policies, or generally reducing their presence in the state. In 2022, GEICO closed down all 38 of their offices in the state, with State Farm raising auto insurance rates in March of 2023. However, the largest action came in May 2023 when State Farm Insurance announced that they would no longer be accepting new applications for any kind of insurance other than personal vehicle insurance because of large increases in construction costs and inflation. About a week later, it was revealed that Allstate had done the same thing, stopping all new homeowners insurance policies for the last several months. Later in the year, Farmers announced new limits on the number of new homeowner insurance policies it will give each month, with numerous other insurance companies, such as Liberty Mutual, no longer offering certain policies in the state.

Other major insurance limiting factors soon struck the state as well. In August 2023, Farmer’s announced 2,400 layoffs, with nearly all companies raising rates by at least 20% in late 2023 and early 2024, including State Farm. For the companies, the reasons were simple: large increases in construction and reconstruction costs, a rise in crime, inflation, and a largely increased risk of danger because of more wildfires. In March, State Farm also made the drastic decision to remove 72,000 insurance policies in the state, roughly 2% of their total number in California. Two months later, both the Tokio Marine America Insurance Company and the Trans Pacific Insurance Company announces that they would be pulling completely out of California, ending over 10,000 home and umbrella insurance policies. Finally, more home insurance rate increases have also been announced, including 15% for Travelers and up to 50% for State Farm.

Many believed that Allstate could avoid it this year. However, it was revealed on Thursday that not only did they ask the Department of Insurance to approve a 34%, but that they have had a rate increase under review since January. Even more, Allstate had originally wanted an increase of 39.6%, but amended it down earlier this year. This is compared to last year, where their rates only went up 4% with no new homes being added in the state. In total, more than 350,000 policyholders would be affected in California.

34% increase

“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 said in a statement.

However, many groups and organizations have challenged Allstate’s new rate hike increase, including Consumer Watchdog.

Consumer Watchdog President Carmen Balber said on Thursday that “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.”

While Insurance Commissioner Ricard Lara has yet to weigh in on the issue or give a statement about it, experts in the insurance field have said that many companies feel that they have had no choice but to increase rates in recent years as a result.

“Allstate and State Farm all want these giant increases,” said Trevor Connery, a lobbyist who has worked for insurance companies in the past, to the Globe on Friday. “But costs have soared in so many places with risks being so high that it’s just not worth it for them unless they increase rates. The alternatives are that they just pull out of California, which they have, or only agree to pay a smaller part of a loss, which home owners will not want. Or, you know, they can go without insurance, but that has a lot of risks to it too, especially in wildfire and earthquake prone California. Oh, or switch, but everyone is expensive right now too, the ones who still accept applications anyway.”

“In California, Commissioner Lara has been on the hotseat for quite some time, and it’s easy to see why. This is turning out to be more and more dangerous for everyone involved, and Lara doesn’t seem to know what to do. And now Allstate and State Farm are asking for giant increases.”

As of Friday, Allstate’s request is still under review.