In the midst of California’s housing insurance crisis, one of the largest home insurance companies in the state, Allstate, has announced plans to resume underwriting new policies as long as the California government implements regulations that insurance companies have long been requesting.
Factors such as wildfire risks, the cost of rebuilding homes, and rising reinsurance prices led Allstate to stop underwriting new home policies in November 2022. However, the company expressed willingness to start offering these policies again if the state’s insurance department allows them to use catastrophe models when requesting rate increases.
Catastrophe models are computer reports that simulate potential catastrophic events and can be used to justify rate hikes.
According to the San Francisco Chronicle, Gerald Zimmerman, Allstate’s Government and Industry Relations Senior Vice President, stated that California is the only state that does not permit insurance companies to raise prices based on catastrophe models or increased reinsurance costs.
Zimmerman explained that since catastrophe models and reinsurance costs could not be used in rate-setting, Allstate made the decision to suspend new policy underwriting in 2022.
In a statement, Allstate said, “Once homeowners insurance rates adequately reflect the cost of providing protection for consumers, we will be able to offer home insurance policies to more Californians through timely rate approvals using our advanced wildfire models and reinsurance costs.”
As of 2022, Allstate was the fourth-largest property and casualty insurance company in California, serving approximately 350,000 homeowners and nearly 1 million auto customers in the state, Zimmerman noted.
Allstate has not provided a specific timeline for when they will resume accepting new policies. According to NBC Bay Area News, the insurance department plans to issue regulations by the end of this year.