Allstate To Raise California’s Car Insurance Costs By 30%

Illinois-based insurance provider Allstate announced on Wednesday that car insurance prices in California would be going up by an average of 30%, becoming the latest such insurance company to significantly raise auto insurance rates in the state.

Major insurance changes began last year when many companies either stopped accepting all new homeowner insurance applications or put severe limits on how many new applications can be accepted in a year. State Farm became the first company in May to no longer accept new applications for any kind of insurance other than personal vehicle insurance. In June, Allstate made a similar announcement, saying that they had already not accepting new applications all year. Farmers was the next to announce in July, reducing the overall number of new monthly policies that they would accept. Throughout the rest of the year, others soon followed.

This is all on top of several insurance companies, including AIG, leaving the California homeowners insurance market in the past few years. The reasons behind the decisions have been, in large part, because of significant increases in construction and reconstruction costs, inflation, and an increased risk of danger because of more wildfires and other natural disasters claimed to be associated with climate change. However, outside of small, natural increases, car insurance rates didn’t move up significantly. While some companies, like Geico, closed their California offices, policies are still being offered online or through the phone.

In 2024 that all changed, with massive rate hikes switching over from homeowners insurance to car insurance. Starting this month, Sate Farm will be pushing up car insurance rates up 21%, with Geico giving a more modest but still large rate hike of 12.8% starting in April. Increased liability, regulation issues, inflation costs, and artificially lowered insurance rates caused by the COVID-19 pandemic have all been cited as reasons for the hikes this year.

Allstate’s auto insurance goes up by 30% in CA

“This isn’t solely a California thing,” said Eddie Hauser, an insurance researcher and former lobbyist, to the Globe on Thursday. “Name a state and rates have gone up for homeowners insurance or car insurance a lot on the past few years. It’s been really bad in Texas the last few years. New York and New Jersey premiums are also rising pretty fast. Home and auto in Florida are also worse than California by rates going up percentage-wise. Even rural states are seeing it go up.”

“What makes California unique is that 2024 is their year to really have costs go up as compared to previous years. Normally rate hikes are in a single percentage point, but a lot of factors are coming in all at once. So we are seeing 10%, 20%. Or, in Allstate’s case, 30%. These are just averages, so if you’re a safe driver or don’t have an expensive car, chances are it will be much lower than that. But it will still go up and is still significant.”

Allstate announced on Wednesday that, just like the other auto insurance companies, rates would be going up. However, they will have the highest increase so far, going up by 30%. While the company originally wanted a 35% rate hike, the California Department of Insurance negotiated it down to 30%, as well as having the company resume direct-sales of auto insurance in the state. Direct sale of home and property insurance, however, was not negotiated back.

“This auto insurance rate approval allows us to protect more customers as we work with the California Department of Insurance to improve insurance availability,” said Allstate on Wednesday.

The California Department of Insurance added, “Allstate’s sale of auto insurance policies, via its website or phone, resumed early this month but with an average rate increase of 30%. Some people will see increases as small as 10% and others will be hit with rates going up as much as 55%.”

With other insurance rates in California likely to go up later in 2024, there are worries that Allstate’s 30% could set a new precedent for even higher rates in the future.

“That’s why this is so big. 30% on average. You know, 10% is high,” added Hauser. “Other places will see this 30% and see it as the new watermark unfortunately. If anything, it’s raising the average insurance rate rise in the state, which will also influence others.”

Other auto insurance rate hike announces for California are likely soon.