More than 40 homeowners’ and auto insurers are pushing for rate hikes, potentially putting more pressure on consumers. The highest increase requested was 42.9% for home and 56.1% for auto insurance premiums.
The Korea Daily analyzed data published by the California Department of Insurance and found that 17 insurers applied to raise homeowners’ insurance premiums from February to August this year. Twenty-six auto insurers also requested premium hikes.
The increases requested by home insurers were double-digit, ranging from 10% to 42.9%. The largest increases were requested by Standard Fire under Travelers Insurance (42.9%), American Modern (42.2%), US Coastal (30.5%), ASI Select under Progressive (30.0%), State Farm (30.0%), Safeco (27.6%), and DB Insurance (26.5%). Eight insurers requested increases of 20% or more, nearly half of all insurers.
For auto, 26 insurers requested increases ranging from a maximum of 56.1% to the lowest of 17.4%. Commerce West (56.1%) requested the highest increase. Century National (51.3%), Integon Preferred (43.5%), California Capital (33.7%), Essentia (29.1%), and Hartford (28.7%) followed. Eighteen of the 26 companies proposed increases of 20% or more. Many of the companies filing rate increases include large insurers such as Progressive and State Farm, meaning that a large portion of home and auto policyholders will likely see significant increases in premiums.
Recently, the state insurance department approved Allstate’s proposal to increase homeowners insurance rates by an average of 34%. This is the highest rate increase since 2021, but it was approved without significant modifications. The hikes currently under review are also likely to be approved at the same rate as the majority of the proposals, meaning that a steep rise in premiums is inevitable.
The biggest reason insurers are raising rates so much is because they are facing huge deficits. Many homeowners insurers operating in the state are reporting losses due to the large number of homes destroyed by wildfires and the significant increase in home prices during the pandemic. Auto insurance has also been in the red as rising labor and material costs have pushed up repair costs, according to the industry.
The situation has led to many insurers refusing to renew policies for high-risk customers or not accepting new business. Liberty Mutual, State Farm, and other insurance companies have declined to renew policies, putting more than 100,000 households at risk of becoming uninsured. Farmers and Allstate have also limited new policy approvals. Some insurers are even pulling out of the state altogether. The state Department of Insurance can limit proposed rate increases, but it does not have the authority to prohibit companies from downsizing or limiting enrollment.
“Prior to 2019, homeowners’ insurers significantly increased premiums for homes in wildfire-risk areas,” said one insurance industry insider, ”but recently, there have been a number of cases where insurers have significantly increased premiums or refused to renew policies for homes that are at risk of damage by actively utilizing drones and aerial photography, regardless of location.”
“Auto insurance has also become more restrictive, with applicants having to wait anywhere from two weeks to nearly a month for their coverage to take effect,” added another industry insider.
BY WONHEE CHO, HOONSIK WOO [cho.wonhee@koreadaily.com]
