Map: Here’s where Allstate wants to raise California homeowners’ insurance rates

Ethan Varian, Bay Area News GroupSan Jose Mercury News

In yet another sign of instability across California’s home insurance market, Allstate is seeking to raise policyholders’ premiums by an average of 34%.

The insurance giant, the sixth largest provider in the state, is asking regulators to approve what would be its steepest California rate hike in at least seven years. The increase would affect more than 350,000 homeowners, including nearly 70,000 across the Bay Area.

The request follows double-digit rate hikes by many major insurers in the state in recent years. It also comes as State Farm, the state’s largest provider, is asking the California Department of Insurance for permission to boost homeowner premiums by 30%.

“Consumers have been hard hit by the massive rate increases insurance companies have imposed 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 rate hike. Allstate last raised rates by 4% in September.

Providers, meanwhile, have suffered billions of dollars in losses during recent catastrophic wildfire seasons. Even as regulators have approved more rate increases, insurers argue that California’s strict regulations on setting premiums have left them in an untenable situation.

They’ve dropped hundreds of thousands of policyholders in fire-prone areas such as Sonoma and Napa counties and the Santa Cruz Mountains. Some companies, including Allstate and State Farm, have even stopped writing new home insurance policies anywhere in California.

In a statement, Allstate said the overall increase is necessary to cover higher insurance payouts due to more frequent and severe weather events, growing repair costs amid inflation and “legal system abuse.” The company did not provide details on the specific legal issues.

Under Allstate’s proposed rate increase, the vast majority of policyholders — including those in the Bay Area — would see their premiums jump between 20% and 40%. However, around 5,000 to 7,000 homeowners would see their rates double or spike even higher. A few thousand others would actually get a rate reduction, some by as much as 60%, as a result of how the insurer aims to update its wildfire modeling system.

In the Bay Area, homeowners in fire-risk areas — including the hills of western Santa Clara County and rural inland parts of the East Bay and North Bay — would see the largest rate hikes.

On average, California homeowners pay $1,453 a year for the most common type of coverage, according to Bankrate.com, a personal finance website. Allstate’s requested rate increase would boost premiums by hundreds — and in some cases, thousands — of dollars, depending on the specific rate hike and the price of a homeowner’s current coverage.

The state insurance department is currently reviewing Allstate’s rate request — initially submitted last year and updated in January — and will have final say over the size of the increase and when it could go into effect.

“Insurance rates must be justified to ensure policyholders do not pay any premiums that are excessive,” the insurance department said in a statement.

It’s not yet clear when the new rates could be approved. That’s in part because Consumer Watchdog has filed an appeal of the proposed increase, asking for information on why Allstate believes the rate hikes are warranted.

That means Allstate, Consumer Watchdog and the insurance department could soon reach a deal on a potentially lower rate hike. But if the groups fail to come to an agreement, regulators would begin holding public hearings to make a final determination on Allstate’s request, a process that would likely take months.

In an attempt to stabilize California’s home insurance market, state insurance regulators are working on a plan that would allow providers to raise rates based on the growing threat of climate change — long an industry demand — in exchange for expanding coverage in parts of the state with the greatest wildfire risk.

Consumer advocates, however, worry the new regulations would also mean steep rate hikes calculated through an opaque process without sufficient oversight.

In the greater Bay Area, insurers would be required to write more policies in Marin, Napa and Santa Cruz counties, as well as parts of San Mateo and Sonoma counties and a sliver of Santa Clara County. Insurers would also have to offer new policies for fire-risk homes in more urban areas such as the Oakland Hills and Los Gatos.

The insurance department aims to finalize the new regulations by the end of the year.