California homeowners are bracing for yet another jolt to their budgets. Allstate has formally requested approval from the California Department of Insurance (CDI) to raise its homeowners insurance rates by an average of
34.1%, a move that could impact more than
350,000 policyholders statewide.
If approved, this would become the
largest homeowners insurance rate increase by a major carrier in California this year, surpassing State Farm’s recent 30% request. While the headline figure is alarming, insurance experts — including Insurance Hour host and agency owner Karl Susman — say the reality is more complicated and may even signal long-term market recovery.
Why Allstate Is Asking for Such a Large Increase
Allstate’s rate filing comes after years of financial strain across California’s home insurance market. The insurer cited several core drivers behind the request:
- Soaring construction, labor, and rebuilding costs tied to inflation
- More frequent and severe disasters, including wildfires and storms
- Litigation and legal system costs that increase claim expenses
“It doesn’t surprise me to see Allstate taking some significant rates right now,” Susman said. “They are way behind the eight ball as far as the industry is concerned.”
Strict California rate regulations have prevented insurers from adjusting pricing fast enough to match these rising costs. Over time, that gap between
premium income and claim payouts has continued to widen.
The Bigger Industry Context
Allstate’s move is part of a much larger pattern reshaping California’s insurance landscape:
- State Farm recently requested a 30% homeowners increase, plus 36% for condos and 52% for renters
- Farmers and AAA have limited new business in many regions
- The
California FAIR Plan is expanding rapidly as private insurers pull back
Under
Proposition 103, insurers must get regulatory approval before changing rates. While this law protects consumers from sudden spikes, it also creates multi-year delays that leave insurers pricing risk with outdated data.
“They’re not trying to gouge people,” Susman explained. “They’re trying to catch up.”
What the 34% Increase Really Means for Individual Homeowners
The average 34.1% increase does
not mean every Allstate customer will see a 34% premium jump.
“There’s a wide range,” Susman clarified.
- Some homeowners may actually see
decreases of up to 57%
- Others could face
increases exceeding 600%, depending on wildfire exposure, roof condition, location, and building materials
A coastal home with modern construction and low wildfire exposure may see little change. A property in a high-risk canyon with brush and older roofing may see a dramatic increase. The 34.1% figure is simply the statewide average.
What Happens Next in the Approval Process
Under Proposition 103, Allstate cannot implement any increase until the CDI completes its full actuarial and financial review.
A CDI spokesperson told CBS 8:
“Under Proposition 103, insurance rates must be justified to ensure policyholders do not pay premiums that are excessive. The Department’s experts will review all relevant data and make fact-based decisions.”
This review process typically takes
several months.
“Hold on tight,” Susman advised. “You’re not going to be seeing your bill increase tomorrow.”
Why This Filing Matters Beyond Allstate Customers
Even for homeowners insured by other companies, Allstate’s filing has broader implications for the entire California market.
After pausing new home policies in 2022, Allstate has indicated it plans to resume writing new business once regulatory reforms under the
Sustainable Insurance Strategy take effect.
Those reforms include:
- Allowing
forward-looking catastrophe modeling
- Offering
wildfire mitigation and home-hardening discounts
- Faster rate approval timelines
- Requiring insurers to
expand coverage in high-risk areas
If implemented successfully, these changes could encourage more insurers to re-enter California — restoring competition and eventually helping stabilize pricing.
“Once that happens,” Susman said, “more carriers will come back to California, and rates will go down.”
The Paradox of Rate Hikes — Short-Term Pain, Long-Term Stability
On the surface, a 34% rate hike feels like bad news. But economically, these filings may represent the first real movement toward market recovery.
Potential long-term benefits include:
- More insurers returning to California
- Reduced dependence on the expensive FAIR Plan
- Risk priced more accurately instead of artificially suppressed
- New discounts for wildfire mitigation and home hardening
“Yes, it’s tough to swallow,” Susman acknowledged. “But where there’s activity, there’s hope.”
What Homeowners Should Do Right Now
Until the CDI makes a final ruling, Susman urges homeowners
not to panic or jump ship prematurely.
“Don’t shop around just yet. Wait it out. Stand by,” he advised.
In the meantime, homeowners should:
- Review policy limits to ensure coverage matches current rebuild costs
- Invest in wildfire mitigation (defensible space, ember-resistant vents, Class A roofing)
- Document all improvements with photos and receipts
- Stay in communication with brokers to monitor market changes
Switching carriers too early could backfire in a still-restricted market where alternatives remain limited.
The Political and Economic Stakes
Insurance Commissioner Ricardo Lara faces immense pressure to balance two competing goals:
- Keeping premiums affordable for struggling homeowners
- Ensuring insurers remain financially solvent
Wildfire losses alone have exceeded
$13 billion in recent years, and reinsurance costs for insurers continue to climb. By law, the CDI must ensure that rates are neither excessive nor inadequate — a narrowing gap in today’s climate-driven risk environment.
Lara’s Sustainable Insurance Strategy, expected to be finalized by the end of 2024, represents the most significant reform effort in decades.
The Takeaway — A Market in Transition
Allstate’s 34% filing is more than just another rate hike headline. It reflects a market attempting to reset after years of regulatory delay, wildfire catastrophe, and insurer retreat.
California’s strict system protected consumers for decades, but it also froze the market in place as risk skyrocketed. Now, with reforms on the horizon, insurers are beginning to move again — and movement, while uncomfortable, is necessary for recovery.
“Hopefully by the end of the year,” Susman said, “when the new guidelines are in place and the market reopens, this will all be moot — because you’ll finally have options again.”
Final Thoughts
For homeowners, the months ahead may bring uncertainty — and possibly higher premiums — but they may also mark the beginning of a more modern, competitive, and stable insurance market in California.
For now, the best strategy is patience, preparation, and perspective.
“Hold on tight,” Susman said. “Know that it’s not happening tomorrow. Change is coming — and it might just be for the better.”
