California homeowners hoping to open new insurance policies can no longer do so with one of the largest home insurance companies in the country.
Allstate, the state Fourth largest The property and casualty insurance company has stopped selling new home, condominium or commercial insurance policies in California, the company said in an emailed statement. It is the latest insurer to say it will no longer offer coverage, citing a worsening climate and high construction costs that have made it difficult to do business in the nation’s most populous state.
State Farm, California’s largest home insurer, made a similar decision last week, citing “rapidly increasing exposure to disasters.” Allstate stopped accepting new policies in the state last year, according to the release.
“We paused our California residential and commercial home and condo insurance policies last year so that we can continue to protect existing customers,” Allstate’s statement said. “The cost of insuring new home customers in California is much higher than the price they would pay for insurance policies due to wildfires, higher home repair costs and higher reinsurance premiums.”
The news was reported earlier by San Francisco Chronicle and in industry publications.
Allstate’s decision in California follows a pattern seen across the US as insurers raise rates, limit coverage or wind down business altogether in areas vulnerable to climate change and natural disasters. In Florida, most of the big insurance companies have pulled out of the state, with homeowners relying on smaller, stretched-out private companies to protect their homes against the severe storms that have become typical.
In the statement, Allstate cited other factors in the pause in new policies in California, including state regulations and inflation, which have pushed up rebuilding costs.
This isn’t the first time Allstate has restricted the sale of new home insurance policies in California. I did it in 1994, after the Northridge earthquake. The company eventually returned to the state, but paused new home insurance policies there again in 2007. Ten years later, it returned to the California market.
Joint moves by California’s Allstate and State Farm could lead more state property owners to rely on the FAIR plan, a plan offered by the state.”The believer is the last resortIn high-risk fire areas. As of 2022, there were more than 270,000 FAIR policies—more than double what was offered in 2018—as the worsening of wildfires and the exodus of traditional insurers from fire-risk areas drove adoption by some homeowners. On the program, which provides temporary and generally more expensive fire coverage.
The FAIR plan requires insurers operating in California to cover losses proportional to their market share in the state.
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