California’s homeowners are already bearing the brunt of devastating wildfires every summer. Now, it will be harder for them to find insurance companies willing to potentially cover the damages.
And with hurricanes in Florida five insurance carriers have already left Florida will Allstate and StateFarm follow?
Allstate, one of California’s largest property and casualty insurance providers, has stopped taking on new policies for both personal and business properties in the state. Last week, StateFarm announced the same decision, citing wildfire risks and high reconstruction costs.
Allstate’s move is aimed “to continue to protect current customers,” spokesperson Brittany Nash wrote in an email to the San Francisco Chronicle. The company paused new insurance policies in California last year, but the move went largely unnoticed.
Unlike StateFarm, Allstate has not clarified the reasons for the move.
California is the only state that requires insurers to set premiums based on how much a company has paid in claims over the past 20 years. The limitations make it difficult for insurance companies to charge the rates they believe are in line with the risks they’re taking.
“How would you do business in a wildfire-prone area where you’re not allowed to look at fuel density around you?” Rex Frazier, president of the Personal Insurance Federation of California, an industry lobbying group told the Standard.
While insurers like StateFarm, Allstate, and AIG have been reducing their presence in California after years of catastrophic wildfires, there are still 115 insurance companies writing residential policies in California currently, according to the Department of Insurance.
The recent pause is not the first time Allstate has halted new homeowner policies in California. The company put the brakes on new applications between 2007 and 2016, after regulators questioned Allstate’s proposal of a 12.2% increase in premiums.