By Megan Fan Munce, SAN FRANCISCO CHRONICLE
https://www.sfchronicle.com/california/article/allstate-home-insurance-rate-19482339.php#
Allstate, one of California’s largest home insurers, is asking to raise its homeowners insurance (opens in new tab) rates by an average of 34.1% later this year.
If regulators approve the filing without changes, which is uncertain, it would be the largest rate increase by a major insurer (opens in new tab) in the past three years. The request is larger than the 30% average increase that State Farm (opens in new tab), California’s largest insurer, is seeking.
More than 350,000 policyholders would be affected by the rate change. Allstate is California’s sixth largest home insurer, representing about 5.5% of the overall market as of last year, according to the Department of Insurance.
Allstate’s proposed figure is an average, meaning that premium changes would vary from house to house. Some customers could actually see their rates decrease by as much as 57%, but most would see higher rates, and at least one homeowner’s rates would increase by 647%, according to the request. Another homeowner, living in Mariposa County, would see a rate increase of 385%, according to the filing.
The California Department of Insurance is reviewing the filing and will determine the exact increase amount and when it could go into effect. Department experts analyze companies’ data about their past costs and claims to determine how much they should be allowed to raise their rates; the increases cannot be excessive or discriminatory. Depending on its analysis, the department could approve a lower rate increase. In 2023, for example, Farmers Insurance Group applied to raise its homeowners, renters and condo rates by 25.5% on average, but was approved for only 12.5%.
If approved without alterations, Allstate’s homeowner rate increase would be the largest of any insurer this year and the largest increase by a major insurer since 2021, when Homesite Insurance Company was approved to raise homeowner rates by 38.2%.
Allstate first submitted its filing in April 2023. Rate filing applications can sometimes take more than a year (opens in new tab) to be approved.
Over the past five years, Allstate has raised homeowners insurance rates three times — 4% in 2023, 6.9% in 2021 (an increase that took 489 days to be approved) and 6.9% in 2019, according to its filings with the state. In 2022, it raised its rates for condominium insurance by 40%.
In California, outside consumer groups such as Consumer Watchdog can intervene in rate filings to seek more information and perform their own analysis of how much rates should change. Carmen Balber, executive director of Consumer Watchdog, said the group intervened in Allstate’s case and has questions about the reliability of the models Allstate uses to determine potential risk. If Allstate, the department and Consumer Watchdog do not all agree on a rate increase amount, it’s possible for the department or Consumer Watchdog to call for a hearing before an administrative law judge, Balber said.
Balber noted Allstate’s prior rate increases have been much smaller than other companies. Though it’s possible for the department to determine that a company does not require a rate increase, Balber said it’s likely Allstate will be approved for some increase.
Several other insurers have sought double-digit rate increases over the past year due to increased losses. This year, Travelers Insurance (opens in new tab) and Safeco (opens in new tab) raised their average home insurance rates by 15.3% and 10.5%, respectively. State Farm raised its rates by 20% in March (opens in new tab), in addition to the 30% rate increase it requested late last month. (opens in new tab) To justify its repeated increases, State Farm warned it could be running out of money — but Allstate’s request is simply due to increased costs, according to the company.
In 2023, Allstate paid out about $0.64 in claims for every $1 it collected in homeowner premiums, almost identical with the statewide average, according to Department of Insurance data. That number does not include the administrative costs of Allstate processing and paying out claims.
“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,” an Allstate spokesperson said in a statement.
Allstate hasn’t written new homeowners policies (opens in new tab) in California since November 2022. In 2019 it started dropping policies in certain ZIP codes where it insured a greater percentage of homes than its overall statewide average, prior filings show. In total, 3,225 homes — less than 1% of Allstate’s overall business in California — were selected for nonrenewal based on which had the greatest risk of wildfire. In its filings, Allstate wrote it does not currently plan to conduct any more mass non-renewals.
California’s overall average home insurance rates are still much lower (opens in new tab) than other catastrophe-prone states, such as Florida and Louisiana, which have more lax regulations. Insurance companies have complained that California’s regulations — including long wait times for rate approvals — have made it difficult to maintain prices that align with current costs, especially as inflation and climate change-influenced natural disasters get worse.
Insurance Commissioner Ricardo Lara has proposed a plan to lure companies back to the California market. The plan, known as the Sustainable Insurance Strategy and due to take effect in December, includes several reforms designed to convince insurers to expand their business in the state, but experts say it will likely lead to higher rates.
Balber said consumers can expect to see more large increase requests such as Allstate’s after the strategy is enacted. But some other factors that have driven increased costs, and therefore rates — such as inflation and rebuilding costs — have started to come down, which could mitigate those increases, she said.
In April, an Allstate representative told regulators at a public workshop that the company planned to begin writing new policies (opens in new tab) once the strategy was in place and it could better align its prices with increasing costs due to climate change and inflation.
