After the review and approval by the California Department of Insurance, California’s Allstate Insurance (also known as Good Hands Insurance) is set to significantly increase home insurance rates, affecting an estimated 350,000 policyholders.
State government data reveals that Allstate submitted a request to the California Department of Insurance last year for a 39.6% increase in home insurance rates, which was later revised at the beginning of this year with a proposed average increase of 34% for California home insurance rates.
After months of scrutiny, Allstate’s request was ultimately approved, marking the largest price hike request by the company this year and the biggest increase by a major insurance company in California over the past three years. The reasons for the rate hike are attributed to rising repair costs, frequent severe weather incidents, government regulations, and system abuse.
In addition to Allstate, California’s largest insurance company, State Farm, notified the insurance department last month of its intention to raise home insurance rates for millions of residents, warning that they might be forced to stop accepting new policies if this adjustment is not approved.
These requests from insurance companies come amidst increasing insurance costs and a volatile insurance industry crisis in California.
The trend of insurance companies exiting the California market persists. As early as May last year, several major insurance companies announced the discontinuation of new policy issuance or imposed limitations on the number of new policies, including auto insurance. Subsequently, some smaller insurance companies announced complete withdrawal from the California market.
Ricardo Lara, the Commissioner of the California Department of Insurance, admitted at a previous event that the cause of this crisis is directly related to California’s outdated insurance regulations and long-standing neglected issues over the past few decades.
For instance, California’s Proposition 103 mandates that insurance companies must obtain government approval before implementing new rates and prohibits rates from naturally increasing due to inflation and other factors.
Lara informed reporters that the state government aims to complete the most extensive insurance regulation reform in over thirty years by the end of this year to lure insurance companies back into the California market.
However, until there is a change in the situation, the public will have to cope with the burden of continuously rising insurance premiums. Customers of Allstate Insurance can expect to see significant premium increases by the end of the year.