Allstate told the state’s insurance department on Friday that it stopped selling new home insurance policies in California last year, as first reported los angeles times. The announcement follows State Farm General Insurance’s announcement that it will stop issuing new fire and casualty insurance applications in California.
For homebuyers, proof of fire insurance is a critical part of getting a mortgage; without it, the deal could fall apart because the mortgage lender won’t approve the loan.
With the exit of two major players in California’s new homeowners insurance market, the FAIR program, a syndicated insurance provider backed financially by the insurance industry as a provider of last resort, could be weakened. Enrollment has surged 70 percent since 2019, reaching 272,846 households by 2022.
More than 100 insurance companies continue to develop new policies for home insurance in California, according to the State Insurance Department website. Before the announcement, State Farm asked the state to increase homeowners insurance by 28%. Allstate filed for a nearly 40% hike before getting out of the game.
Insurance premiums are lower in California compared to the rest of the country. The average annual insurance premium for a California homeowner is $1,300. Other states at risk of wildfires pay $2,000. In Florida, which is often battered by hurricanes, homeowners pay $4,000 for homeowners insurance, according to the Insurance Information Institute, an industry trade group.
For about 35 years, California’s insurance market has been regulated by Proposition 103, which requires insurers to justify rate increases amid government and public scrutiny.
– Andrew Asch