California Insurance Crisis: Homeowners Face 30% Rate Hikes Amid Extreme Weather

Property insurance premiums have spiked in California, placing further burden on homeowners in environmentally unstable regions, and provoking a call for California to declare a state of emergency.

Property Insurance Crisis

California is in the midst of a property insurance crisis, as homeowners across the state are looking down the barrel of massive price hikes this year due to extreme weather events.

Seeking More Rate Hikes

Major property insurance companies in the state like State Farm and Allstate are not only cutting back policies in high-risk areas but are now asking the state government for permission to increase rates by 30%.

Allstate Asks DOI

Allstate is currently seeking approval from the state’s Department of Insurance to raise insurance rates by an average of 34.1%.

Largest Hike in Three Years

If approved by the department, it would signal the largest rate hike seen in the state by a major insurer in the past three years, serving to exacerbate the problem of unaffordable insurance in California.

Significant Payout Increases

“Our payments to help California residents recover from accidents and disasters have increased significantly in recent years due to higher repair costs, more frequent and severe weather and legal system abuse,” the company said in a public statement.

State Farm Too

State Farm is also asking the state for permission to hike their rates by 30% for homeowners, 36% for condo owners, and a staggering 52% for rental policies, as shown in a recent filing with the Department of Insurance.

72,000 Lose Coverage

The request from State Farm comes just a few months after the company announced that it would not renew coverage for 72,000 properties across the state including homes, rental dwellings, and commercial apartments, among others.

Ineligible Policies

The company also added in a state filing that “Personal Lines Homeowners and Dwelling Fire Insurance policies that present the most substantial wildfire or fire following earthquake hazards, or are in areas of significant concentration are no longer eligible.”

Limited Business Across the State

Both companies, along with Farmers Insurance, have begun limiting their business across the state due to the increasing unpredictability of extreme weather patterns. 

$6 Billion Lost to Catastrophe Claims

State Farm has reportedly lost more than $6 billion over two years as a direct result of the “significant increase in homeowners incurred catastrophe claims.” Last year it declared that it will no longer accept applications for business or personal property in the state. 

Relatively Low Rates

As it is, Californians pay relatively low rates for property insurance compared to other states, like Florida, which are also experiencing extreme weather events. 

Florida vs California

The average annual insurance premium for property owners in California is $1,453, compared to Florida’s average annual premium of $5,533.

A Major Blow for Californians

Still, these policy changes are a major blow for California property owners. State Farm currently accounts for 8.7% of all home insurance policies in the state, and Allstate accounts for 5.5%, according to the Department of Insurance. 

Legal Restrictions in Place

California has a number of legal restrictions against unfair insurance rate hikes for residents, but it hasn’t stopped the ongoing jump in premiums in the last year as companies react to devastating wildfires and other natural disasters. 

39,000 Homes Lost in 5 Years

In the last five years, a staggering 39,000 homes in California have been destroyed by the same wildfires that have ravaged 10 million acres of forested land. 

Calling on the Government

Now, public officials are calling on the state government to do something about rising insurance premiums and shrinking policy access, which could threaten to financially cripple homeowners across California.

San Bernadino County Supervisors Speak Out

Late last month the San Bernardino County supervisors officially requested the California government to declare this issue a statewide state of emergency. 

“At Risk of Catastrophic Loss”

“The reduction of insurance options in the state has had a direct negative impact on our consumers’ ability to get coverage,” said Dawn Rowe, the San Bernardino County Board of Supervisors Chairman and Third District Supervisor. “It’s putting our homeowners and businesses at risk of catastrophic loss.”

A Unanimous Vote

The County Board of Supervisors voted unanimously to urge California Insurance Commissioner Ricardo Lara and Gov. Gavin Newsom to take action to strengthen and stabilize the insurance marketplace.

No More Dropped Policies?

If a state of emergency is declared, insurance providers will be stopped from further dropping pre-existing home insurance policies. 

Oil Dumping Scandal Rocks Ships Heading to New Orleans

Two shipping companies have been fined after knowingly hiding a large oil spill in the Atlantic Ocean. Oil Dumping Scandal Rocks Ships Heading to New Orleans

20 Eye-Opening Realities Facing Retiring Baby Boomers

As Baby Boomers approach retirement, the promise of leisure and security often seems unattainable. This generation faces unique challenges that could redefine retirement. Here’s a stark look at the realities shaping their outlook. 20 Eye-Opening Realities Facing Retiring Baby Boomers

Retail Apocalypse: Massive Closures Sweep Across U.S. Brands

Stores across the U.S. are closing at unprecedented levels, according to new research from advisory firm Coresight Research. Read on for more information about the impact this could have on you and your communities. Retail Apocalypse: Massive Closures Sweep Across U.S. Brands

Featured Image Credit: Shutterstock / Vlad Teodor.