Allstate has quietly stopped new home insurance policies in California
Allstate has stopped writing new homeowner, condominium and commercial insurance policies in California, the company confirmed to The Chronicle.
The insurer, the fourth largest property and casualty insurance provider in the state in 2021, paused new policies “so we can continue to protect current customers,” spokesperson Brittany Nash wrote in an email to the Chronicle.
The pause began last year but appeared to receive only a passing mention in industry publications. The Chronicle learned of the development this week, after reviewing an Allstate rate increase request to the California Department of Insurance.
It was not immediately clear what prompted Allstate’s pullback on new policies. But State Farm, the largest provider of property and casualty insurance in California, made waves in late May by announcing it would stop issuing new homeowner policies in the state due to inflation, wildfires and rising reinsurance costs.
That Allstate quietly did the same thing last year signals that insurance woes in the state may be more severe than the public is aware of.
“State Farm is unusual in that it announces such underwriting actions. It is not required by law and most insurers do not,” said Rex Frazier, president of the Personal Insurance Federation of California, an association of insurers, in an email to The Chronicle over the weekend.
The only public disclosure required of insurers pulling back eligibility in the state comes when they ask the California Department of Insurance for rate increases, Frazier said Thursday.
At least two other insurers, AIG and Chubb, which cater to high-end homes, have pulled coverage for some customers in recent years.
Consumer advocates have noted that there are still more than 100 insurers doing business in California, even as many big names pull out.
But homeowners in high-risk fire areas may have a harder time finding coverage, leading to more usage of the FAIR Plan, a state-offered “insurer of last resort” meant as a temporary safety net that covers only fire insurance and generally costs more than other plans.
Many insurance companies have already stopped renewing policies in fire-prone areas after fires in 2017 and 2018 devastated communities and resulted in large payouts.
State Farm is the only insurer in the state that has not non-renewed any customers after 2017 because of fire risks — causing their already leading share of the homeowner insurance market in California to grow 3.6% in five years.
Allstate had previously paused new homeowner policies in California from 2007 to 2016, after state regulators questioned the company’s request for a 12.2% rate increase.
Consumer advocates say State Farm’s decision to stop writing new policies in California is a tactic to push through rate increases. But insurers say California’s slow rate approval process and refusal to allow companies to charge for reinsurance and forward-looking climate risks hurt their ability to take on more customers in the state.
Insurers could also be reducing their market share to avoid the need to compensate for losses from the FAIR Plan, which requires companies as a cost of doing business in the state to cover losses proportional to their market share in the state.
Chronicle staff writer Carolyn Said contributed to this report.
Source: San Francisco Chronicle
