Allstate Announces Halt to New Home Policies in California

Allstate told the state’s Department of Insurance on Friday that it stopped selling new home policies in California last year, as first reported by The Los Angeles Times. The announcement follows State Farm General Insurance’s news that it stopped issuing new applications for fire and casualty insurance in California.

For homebuyers, proof of fire insurance is a crucial part of obtaining a mortgage; without it, a deal can collapse because mortgage lenders won’t approve a loan.

With two major players out of the market for new homeowners’ insurance in California, the FAIR plan, a syndicated insurance vendor financially backed by the insurance industry as a provider of last resort, could be weakened. Enrollments have surged 70 percent since 2019 to 272,846 homes in 2022.

More than 100 insurers continue to write new policies for homeowners insurance in California, according to the state Department of Insurance website. Before its announcement, State Farm requested a 28 percent hike on homeowners insurance from the state. Allstate filed for a nearly 40 percent increase before it stepped back from the game.

California has lower insurance premiums compared to the rest of the nation. The average California homeowner’s annual insurance premium is $1,300. Other states with wildfire risk pay $2,000. In Florida, which often is battered by hurricanes, homeowners pay $4,000 for homeowners insurance, according to the industry trade group Insurance Information Institute.

For about 35 years, California’s insurance marketplace has been regulated by Proposition103, which demands insurers justify rate hikes in a process open to governmental and public scrutiny.

– Andrew Asch