Allstate approved for 34.1% rate hike in California, affecting over 350,000 policyholders

Allstate, one of California’s largest insurers, is set to raise rates by an average of 34.1% after receiving approval from the California Department of Insurance.

The rate hike would impact more than 350,000 policyholders statewide come November.

“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,” company officials said in a statement to KTLA.

Allstate is the state’s fourth-largest property and casualty insurance provider, representing about 5.5% of the overall market as of last year, according to the Department of Insurance.

The company’s latest price hike comes amidst a broader insurance problem in California. Some companies, including Allstate, stopped accepting new insurance property applications last year.

Others, like Tokio Marine America Insurance Co. and Trans Pacific Insurance Co ., have decided to limit business in California altogether, halting new home and personal insurance applications.

In March, State Farm General Insurance Company announced plans to non-renew about 72,000 policies in California, which will impact property insurance and commercial apartment policies.

Last September, California Insurance Commissioner Ricardo Lara said he would write new rules allowing insurers to consider climate change when setting their rates. He has also pledged to consider regulations allowing them to consider some of their reinsurance costs.

The rules requiring insurance companies to get permission from the state to raise their rates would not change, according to the Associated Press.

The state will only let companies use these new rules if they write more policies for people who live in areas threatened by wildfires. This means companies must write policies in these areas for at least 85% of their statewide market share.

Some consumer groups, including the Consumer Watchdog, fear that allowing insurance companies to consider climate change in their rates will lead to dramatically higher coverage costs for homeowners.

Lara said insurance companies could also consider improvements that owners have made to make their homes more resistant to wildfires and the billions of dollars in public money that the government has spent to better manage forests and reduce wildfire risks, ultimately benefiting homeowners.

Allstate told KTLA that it’s offering discounts to customers who have taken action to mitigate wildfire risk on their property.

The rapid decrease in insurance companies offering services to California residents has resulted in many new and existing homeowners turning to California’s FAIR plan for coverage. The plan covers basic hazards but is described as a “temporary safety net” since it was never meant to replace insurance coverage companies can offer.

The state doesn’t require potential homeowners to have insurance; however, many mortgage lenders may require some proof of insurance as a loan condition.

Consumer Watchdog criticized the insurer for not disclosing the computer model used to determine surcharges based on wildfire risk in a blog post . Allstate’s rate increase proposal was initally challenged by the group, demanding the insurer provide more data.

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