Allstate is signaling that it is willing to write new homeowner policies in California once again, provided that regulators implement reforms such as allowing future wildfire modeling– a position that dovetails with the insurance commissioners' reform plans for 2024.
The insurance company hit pause on writing new property insurance policies in the state in 2022, with State Farm following suit. The business decisions were made as the California insurance crisis worsened amid concerns about climate-driven disasters such as wildfires.
“We’re working with the California Department of Insurance to improve insurance availability in the state,” Allstate said in a statement emailed to the Southern California Record. “Once home insurance rates fully reflect the cost of providing protection to consumers, we’ll be able to offer home insurance policies to more Californians with timely rate approvals, the use of our advanced wildfire modeling and reinsurance costs.”
The California Department of Insurance says it is moving forward with regulatory changes this year in a renewed push to bring insurers back into the California market.
“California is battling a 21st-century insurance crisis with 20th-century rules,” Gabriel Sanchez, the department’s press secretary, said in an email to the Record. “With climate change affecting every aspect of our lives, just relying on what we did in the past won’t improve insurance choices for homeowners and businesses.”
Sanchez stressed that the state’s insurance woes have been in the making for decades and that the department is poised to implement changes this year to encourage insurers to start writing more policies, for homeowners and others.
“We are balancing the urgent needs of homeowners with a need for transparency,” she said. “We will review all public comments as we move forward with bringing companies back to California.”
Among the initiatives Commissioner Ricardo Lara has been pursuing is a catastrophe modeling regulation, with a goal of putting a package of reforms on the books by December of this year.
For more than three decades, state regulations have based catastrophic insurance losses— like what homeowners have suffered in recent years due to wildfires— only on historical data.
“These outdated rules have contributed to rate spikes and balloon premiums following major wildfire disasters without fully accounting for the growing risk caused by climate change or risk-mitigation measures taken by communities or regionally, as a result of local, state and federal investments,” the department said in a March news release.
Although the department allows the use of catastrophe modeling for earthquake losses, new proposals would expand the use of those models to events such as wildfires, terrorism and major flood damage, according to the department.
Consumer benefits from Lara’s proposals include more stable costs, increased competition in the market and strong oversight of the models to be proposed by insurers, state insurance officials said.
But critics of the department’s plans say that the insurance industry crisis is exaggerated and that companies doing business in California have had smaller loss ratios compared to the national averages.
“Contrary to its propaganda, the insurance industry is not on the brink of ruin in California,” the group Consumer Watchdog said in a letter to California officials last year. “The home insurance line has been more profitable in California over the last 25 years, operating under Proposition 103 rules, than the national average.”
Any new rules should require insurers to sell coverage to any homeowner who performs regular mitigation to protect their homes from wildfires, according to Consumer Watchdog.
American National Insurance was the last insurer to say it would be limiting its business in California.