Bay Area Allstate customers to face spiking home insurance premiums

State regulators gave approval for Allstate to increase home insurance rates for California customers by an average of 34%, the largest increase of a major insurer in the last three years.

The rate increase, approved this month by the Department of Insurance, will impact more than 350,000 homeowners, including 70,000 in the Bay Area, where — depending on their zip code — policyholders could see their rates double. In some cases, homeowners will see a decrease.

But most in the nine-county Bay Area will see their rates jump between 20% and 40%. Around 5,000 homeowners in high-wildfire risk areas will see their rates double.

For example, in the hills of San Mateo County, near Portola Valley, rates are set to increase on average, depending on the plan, between 63% and 136% for the 74 policyholders there. Rates will double for the five policyholders in Sunol, a town in the hills east of Fremont that has seen its share of brush fires this summer. The same goes for the 111 policyholders in one zip code in the Santa Cruz mountains.

Homeowners will see the increases on their bills on their first renewal date following Nov. 7.

California’s insurance crisis has been mounting for years, as swaths of the state have been devastated by costly wildfires and extreme storms.

Beyond that, providers are also frustrated with the state’s Proposition 103, which requires them to get approval from the Department of Insurance to raise rates, and doesn’t permit them to use catastrophe models to project future wildfire losses.

As a result, providers are declining to renew policies and pulling out of California entirely. With more insurers declining to renew their policies, many homeowners are relying on the costly FAIR Plan, California”s insurance program of last resort.

Those who stay, like Allstate, are increasing rates significantly and declining to offer plans to new policyholders. The Department of Insurance has signed off on double-digit rate increases by many of the state’s major insurers in recent years. State Farm, which already got a 20% rate increase approved earlier this year, is asking the Department of Insurance to raise rates an additional 30%. Despite securing the increase, State Farm still decided not to offer renewals to 72,000 policyholders.

Allstate won’t be able to pull the same move — at least, not yet — due to a deal struck by the insurance giant, the Department of Insurance and Consumer Watchdog, a consumer advocacy group that has challenged the rate hike, arguing that Allstate’s rates were unwarranted.

Consumer Watchdog dropped its appeal, conceding that the company has faced legitimate cost increases, but got the provider to agree to a six-month moratorium on non-renewals.

“While no one likes to see a double-digit increase, we do find it was justified in this case,” said Carmen Balber, executive director of Consumer Watchdog. “We were still able to get some consumer protections.”

Allstate did not immediately respond to a request for comment.

Homeowners in the Golden State pay an average of $1,456 a year for $300,000 in dwelling coverage, according to personal finance website Bankrate. The hike by Allstate swells premiums by hundreds of dollars.

With California’s insurance crisis worsening, regulators are working on a plan that would streamline the Department of Insurance’s review of rate increases, in exchange for insurance companies expanding coverage to parts of the state with high wildfire risk.

Allstate has said that, if the new regulations are approved, the company would “begin selling new homeowner insurance policies tomorrow.”

But Consumer Watchdog has raised concerns around the department’s rule changes.

“It gives the insurance industry everything they want,” Balber said.

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