Another sign of instability within the California home insurance market is Allstate's intention to extend insurance premiums by a median of 34 percent.
The insurance giant, the sixth-largest provider within the state, is asking regulators to approve the biggest rate increase in California in no less than seven years. The increase would affect greater than 350,000 homeowners, including nearly 70,000 across the Bay Area.
The request follows double-digit premium increases by most of the state's major insurers lately. In addition, State Farm, the state's largest provider, has asked the California Department of Insurance for permission to lift homeownership premiums by 30%.
“Consumers have been hit hard by the massive premium increases that insurance companies have implemented recently, and Allstate customers would be in the same situation,” said Carmen Balber, executive director of Consumer Watchdog, a consumer advocacy group that has challenged the premium increase. Allstate last raised premiums by 4% in September.
Providers suffered billions in losses in the course of the recent devastating wildfire season. Even though regulators have approved further premium increases, insurers argue that California's strict rules for setting premiums have put them in an untenable position.
They have lost lots of of hundreds of policyholders in fire-prone areas like Sonoma and Napa counties and the Santa Cruz Mountains. Some firms, including Allstate and State Farm, have even stopped writing recent home insurance across California.
In an announcement, Allstate said the general increase was mandatory to cover higher insurance payments resulting from more frequent and severe weather events, rising repair costs resulting from inflation and “abuse of the legal system.” The company didn’t provide details on the precise legal issues.
Under Allstate's proposed premium increase, most policyholders — including those within the Bay Area — would see their premiums rise by 20 to 40 percent. However, for about 5,000 to 7,000 homeowners, their premiums would double and even rise. Several thousand others would actually see their premiums reduced, some by as much as 60 percent, because the insurer looks to update its wildfire model.
In the Bay Area, the best rate increases for homeowners could be expected in fire-prone areas, including the hills of western Santa Clara County and the agricultural inland areas of the East Bay and North Bay.
According to Bankrate.com, a private finance website, California homeowners pay a median of $1,453 per yr for probably the most common style of insurance. The increase Allstate is asking for would increase premiums by lots of – and in some cases hundreds – of dollars, depending on the precise increase and the value of the homeowner's current insurance.
The state Department of Insurance is currently reviewing Allstate's rate request – originally submitted last yr and updated in January – and could have the ultimate say on the quantity of the rise and when it should take effect.
“Insurance rates must be justified to ensure that policyholders do not pay excessive premiums,” the Ministry of Insurance said in an announcement.
It's not yet clear when the brand new rates is perhaps approved, partly because the buyer protection organization has appealed the proposed increase and is asking for information on why Allstate believes the speed increases are justified.
That means Allstate, the buyer protection group and the Insurance Department could soon reach an agreement on a potentially smaller rate increase. But if the groups fail to achieve an agreement, regulators would hold public hearings to make a final decision on Allstate's request, a process that will likely take months.
To stabilize California's home insurance market, state insurance regulators are working on a plan that will allow providers to lift their premiums within the face of the growing threat of climate change – a measure long called for by the industry – and in return expand insurance coverage in parts of the state where wildfire risk is highest.
However, consumer advocates fear that the brand new regulations would also result in significant tariff increases, which could be calculated using an opaque procedure without sufficient control.
In the greater Bay Area, insurers would need to issue more policies in Marin, Napa and Santa Cruz counties, in addition to parts of San Mateo and Sonoma counties and a small a part of Santa Clara County. Insurers would also need to offer recent policies for homes at fire risk in additional urban areas akin to the Oakland Hills and Los Gatos.
The Ministry of Insurance goals to finish the brand new regulations by the tip of the yr.
Originally published:
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