California homeowners hoping to open new insurance policies can no longer do so with one of the largest homeowners insurance companies in the country.
Allstate, the fourth-largest provider of property and casualty insurance in the state, has stopped selling new home, condominium or commercial insurance policies in California, according to a company statement, first reported by The San Francisco Chronicle. It is the latest insurance giant to say it will no longer offer coverage, citing worsening weather and higher construction costs that have made it difficult to do business in the country’s most populous state.
California’s largest homeowners insurance provider, State Farm, made a similar move last week, citing “rapidly growing catastrophic exposure.” Allstate stopped accepting new policies in the state last year, according to the statement.
“We paused new California homeowners, condominium and commercial insurance policies last year so we can continue to protect existing customers,” Brittany Nash, a spokeswoman for Allstate, said in the statement, which was shared with the media. communication. “The cost of insuring new home customers in California is much higher than the price they would pay for the policies due to the wildfires, higher home repair costs and higher reinsurance premiums.”
Allstate’s decision in California follows a pattern seen across the United States in which insurance companies raise rates, restrict coverage or shut down business entirely in areas vulnerable to climate change and natural disasters. In Florida, most of the big insurance companies have withdrawn from the state, and homeowners are relying on smaller private companies, whose resources are drying up, to protect their homes from the severe storms that have become typical.
In the statement, Allstate cited other factors in pausing new policies in California, including state regulations and inflation, which have led to higher rebuild costs.
This isn’t the first time Allstate has limited the sale of new homeowners insurance policies in California. It did so in 1994, after the Northridge earthquake. The company eventually returned to the state, but halted new homeowners insurance policies there again in 2007. Ten years later, it returned to the California market.
The combined moves of Allstate and State Farm in California may lead more homeowners in the state to turn to the FAIR Plan, a “insurer of last resort” offered by the state in high-fire risk areas. As of 2022, there were more than 270,000 FAIR policies, more than double what was offered in 2018, as worsening wildfires and an exodus of traditional insurers from fire-threatened areas led some homeowners to rely on the program, which provides temporary and, generally more expensive, fire coverage.
The FAIR Plan requires insurance companies operating in California to cover losses proportional to their market share in the state.