California has approved Allstate’s requestion to increase homeowner insurance premiums by 4%, with another hike of nearly 40% still under consideration.
Consumer Watchdog, a nonprofit consumer advocacy group, said it is currently reviewing the insurer’s additional rate hike filing, which could potentially result in an additional $196 million in homeowner costs.
The group also criticized the approved 4% rate hike, stating that Allstate had misled the California Department of Insurance (CDI) over its decision to suspend new homeowner policies in the state.
According to Consumer Watchdog founder Harvey Rosenfield, Allstate abruptly made its decision last year without complying with California law.
Rosenfield said his group had called on the insurance giant to prove that it was entitled to a rate increase considering its decision to stop new home insurance sales, adding that it should not be rewarded for reducing insurance access without justifying the impact of this decision on its rates.
“By not requiring Allstate to show the impact of its withdrawal on rates, the commissioner is approving a rate increase that has not been justified, a violation of California law,” he said.
Responding to the criticism, CDI spokesperson Gabriel Sanchez said Rosenfield’s assertions “aren’t based in law or fact.”
“Allstate’s action in November 2022 was reported in industry trade publications at the time, and California law does not require prior approval when a company pauses new policies,” Sanchez told The Mercury News. “Our department’s rate regulation experts carefully review all insurance company rate filings to protect Californians from unjustifiably high rates.”
As for Allstate, the insurer said it had applied for the 4% increase back in April and noted how California’s Proposition 103 makes it difficult for insurers to quickly adjust rates.
Proposition 103 requires insurance companies to obtain the CDI’s approval before implementing rate changes. It was authored by Rosenfield and was passed by California voters in 1988.
Allstate was recently joined by State Farm in suspending new homeowner policies in California, triggering alarm bells for the state’s property insurance market.
In response to these considerations, CDI has maintained that 115 other insurers continue to write residential policies statewide, even in areas near fire-prone wildlands.
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