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The California Department of Insurance gave Allstate permission to increase its homeowners insurance premiums by an average 34.1 percent, the largest rate hike of any major insurer approved by the agency in the past three years.
The decision is expected to affect more than 350,000 policyholders across the state, with homeowners in Fresno, Madera and Mariposa counties seeing the highest increases.
California homeowners holding policies with Allstate, one of the largest private home insurers in the state, will see their rates increase at their first renewal date following November 7, according to the company's filing. The rate hike only covers homeowners insurance, but Allstate has an open request to increase its premiums for condo owners by an average of 30 percent, the San Francisco Chronicle reported.
In a statement to Newsweek, Allstate said: "This home insurance rate approval allows us to continue protecting our existing customers as we work with the California Department of Insurance to improve coverage availability and create a more viable and sustainable homeowners insurance market for consumers in the state.
"Higher home values and repair costs coupled with more frequent, severe weather lead to higher payments to help customers recover, so we need to adjust rates to better reflect the cost of protecting our customers."
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The insurer told Newsweek that it's offering discounts to current homeowners insurance customers who have taken action to mitigate wildfire risk on their property.
Allstate's rate hike is yet another blow to California homeowners struggling with insurers cutting coverage, withdrawing from the state or increasing rates. The last time the California Department of Insurance approved such a significant rate hike for a major insurer was in 2021, when Homesite Insurance Co., a subsidiary of American Family Insurance, was allowed to increase its premiums by 38.2 percent.
But such rate hikes are expected to become more common. Only a few months after it announced it wouldn't renew coverage for 72,000 policyholders in the state, State Farm asked the California agency for permission to increase its homeowners rate by 30 percent in July. It received approval for a 20 percent increase. As of 2022, State Farm accounted for 8.7 percent of all home insurance policies in the Golden State, as reported by the San Francisco Chronicle.
With the growing risk posed by more frequent and more severe extreme weather events such as wildfires in California, it's almost inevitable that insurers in the state will seek to either increase rates or limit coverage.
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According to Bankrate data, California homeowners currently pay an average of $1,403 per year to insure $300,000 in dwelling coverage—about 35 percent less than the national average. That's because California's strict legislation has largely shielded residents from massive rate hikes.
The California Department of Insurance is caught in a tricky situation in which preventing insurers from increasing their premiums to reflect the higher risk posed by natural disasters protects homeowners but might lead to an exodus of companies from the state.
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"When no private insurer is willing to cover a homeowner at a reasonable price, then there's a sort of state backstop that's in place to take that role, but it's not designed to handle tens of thousands of policies," Benjamin Keys, an economist and a professor of real estate and finance at the University of Pennsylvania's Wharton School, previously told Newsweek.
"They're designed for very short-term disruptions in the market to make sure people have continuous coverage because without insurance they can't get a mortgage, and the housing market shuts down."
Are you a California homeowner affected by Allstate's rate hike? We want to hear from you. Contact g.carbonaro@newsweek.com.
Update 9/2/24, 3:15 a.m. ET: This article was updated to include a statement from Allstate.
About the writer
Giulia Carbonaro is a Newsweek reporter based in London, U.K. Her focus is on the U.S. economy, housing market, property ... Read more