By Megan Fan Munce, SAN FRANCISCO CHRONICLE

https://www.sfchronicle.com/california/article/allstate-home-insurance-19419045.php

One of California’s largest home insurers says it plans to resume writing new policies — as soon as the state implements regulations insurers have been asking for. 

Allstate stopped writing new homeowner policies in November 2022 due to wildfire risk, the cost of rebuilding homes and the rising price of reinsurance, which is insurance for insurers. But at a Wednesday public workshop held by the California Department of Insurance, a company representative indicated Allstate is getting ready to resume writing new policies in the state. (The company continues to renew existing policies.)

Once California enacts a slew of insurance regulations, “Allstate will begin writing new homeowner insurance policies in nearly every corner of California. If the regulations were in effect today, we would begin selling new homeowner insurance policies tomorrow,” Gerald Zimmerman, Allstate’s senior vice president of government and industry relations said at the workshop. 

The company did not say exactly when it would resume writing new policies, but the reforms are expected to be enacted in December.

The regulation is a tradeoff — insurers may come back, but if they do, it will most likely be with much higher rates, according to Harvey Rosenfield, founder of Consumer Watchdog.

Michael Soller, deputy insurance commissioner for the Department of Insurance, said in a statement that the department’s goal is to benefit consumers by bringing insurers back to the state. 

“Availability is the first step toward affordability,” he said.

AllState is the fourth largest property and casualty insurer in the state as of 2022, the latest data available. It insures approximately 350,000 homeowners in the state, along with nearly a million auto customers, Zimmerman said Wednesday. 

It’s one of many insurers — big and small — that have either stopped writing new policies or left California entirely citing rising costs and risk in the state. It is also the first major insurer that stopped writing new policies to publicly announce plans to resume in response to the upcoming reforms, according to Rosenfield.

State Farm, California’s largest home insurer, stopped writing new policies in May 2023. A State Farm spokesperson did not respond to questions about whether the company planned to resume writing new policies in California in the future. Like Allstate, the company continues to insure existing customers, though in March it announced it would not renew 30,000 homeowners policies. In that March announcement, State Farm wrote that it would “continue to work constructively with the California Department of Insurance, the governor’s office, and policymakers to actively pursue these reforms in order to establish an environment in which insurance rates are better aligned with risk.”

Allstate’s comments are a major vote of confidence in Insurance Commissioner Ricardo Lara’s Sustainable Insurance Strategy — his plan to lure insurers back to the state. It is the largest insurance reform in the state in more than 30 years, according to the Department of Insurance. The department plans for all regulations to be enacted by December, though it could take longer for insurers to be able to take advantage of the reforms.

California has some of the strictest insurance regulations in the country. It is the only state where insurers are not allowed to base their rate hikes on catastrophe models — forward-looking calculations of risk — or the rising cost of reinsurance premiums, according to both Zimmerman and the Department of Insurance. 

Under current regulations, insurers are only allowed to use catastrophe models to calculate rates for earthquake insurance. One proposed change under the Sustainable Insurance Strategy would expand that to wildfire risk, as well as the risk of post-earthquake fires and terrorism. Another proposed regulation yet to be released would also allow insurers to incorporate reinsurance costs into rate hikes, the department previously announced.

The inability to use catastrophe models and reinsurance costs in ratemaking influenced Allstate’s decision to pause writing new policies in 2022, according to Zimmerman. 

“We’re working with the California Department of Insurance to improve insurance availability in the state. Once home insurance rates fully reflect the cost of providing protection to consumers, we’ll be able to offer home insurance policies to more Californians with timely rate approvals, the use of our advanced wildfire modeling and reinsurance costs,” an Allstate spokesperson said in a statement following the workshop.

In 2023, AllState also stopped offering direct sales of new auto insurance policies, but customers were still able to get new policies through agents. Then, this February, Allstate resumed writing new auto policies — with average rates 30% higher than what they were before.

Rosenfield also pointed out that neither Allstate’s promise, nor the currently drafted regulations, bind insurers to writing more policies in wildfire-prone areas, which have been the hardest hit by the insurance crisis. Lara has said his strategy will require insurance companies to write a significant percentage of their business in California in wildfire areas. 

“California’s insurance crisis is decades in the making and we are staying on track to implement all changes this year so insurance companies start writing more policies in all areas,” Deputy Insurance Commissioner Michael Soller said in a statement. “Our goal is to safeguard the integrity of the insurance market to benefit consumers, not kowtow to the whims of entrenched interests that have secretly benefited from a dysfunctional marketplace for decades.

“California is battling a 21st-century insurance crisis with 20th-century rules. With climate change affecting every aspect of our lives, just relying on what we did in the past won’t improve insurance choices for homeowners and businesses,” Soller said. “California’s insurance crisis is decades in the making and we are staying on track to implement all changes this year so insurance companies start writing more policies in all areas. We are balancing the urgent needs of homeowners with a need for transparency.”