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Rising Costs and Risks of Auto and Home Insurance in California

Since 2022, Auto and Homeowner Insurance in California have become increasingly difficult to obtain.

Most major Auto and Homeowner insurance carriers have requested multiple rate increases since November 2022. During Covid, claims costs skyrocketed and carriers were not able to raise rates.  Most slowed new business applications and reduced their Renewal offers.  Many carriers are simply closed for new applications. 

Once the Insurance Commissioner was re-elected in November 2022, he then began to review and approve carrier requests for rate increases, which they refer to as "rate relief" because they need to raise rates to account for increased claims costs across Auto and Homeowners policies.  Mercury and Safeco have remained open, but very restrictive on new Auto and Home applications and many new quotes are subject to Block Bind and a 15-20 business day waiting period.  This makes it difficult as many people need coverage immediately and cannot wait for an approval period.  Several insurance companies have recently announced their plans not to renew policies for California homeowners starting in 2024. Among these companies are Merastar Insurance Co., Unitrin Auto and Home Insurance Co., Unitrin Direct Property and Casualty Co., and Kemper Independence Insurance Co.

These decisions are attributed to a nationwide restructuring move by their parent company, Kemper Corp, as stated in documents filed with the California Department of Insurance.   Allstate has recently announced a 30% increase in Auto rates and is still limiting new business applications. The Hartford Financial Services Group, better known as The Hartford, announced recently that it would no longer issue new homeowners insurance policies in California starting in February 2024. The Hartford noted that it would continue to write new policies for all other types of existing insurance policies in California.  State Farm and Allstate have been closed for New Homeowners applications and announced their decisions to stop accepting insurance applications for all business and personal property in the state.

Their decisions were influenced by rising business costs and heightened risks of natural disasters, particularly wildfires, which have become a major concern in the state. California Insurance Commissioner Ricardo Lara has taken steps to increase insurance protections for wildfire survivors, aiming to streamline the claims process and encourage safer practices, such as upgrading roofs and windows to mitigate wildfire risks. While California does not mandate homeowners to have insurance, many mortgage lenders may require proof of insurance as a condition for loans, further emphasizing the importance of these developments for homeowners in the state.

All homeowner insurance companies that are still in California, are implementing stricter rules for reinstatement. More questions regarding the conditions of your home are being asked as well as photograph proof. Home inspections are also becoming a more common request especially if you own an older home. Homeowner insurance companies are trying to get rid of more problematic properties due to financial risk.

Besides the homeowner insurance issue, Californians are facing the prospect of substantial car insurance rate hikes as they navigate a dwindling number of insurance options. The state, which once had 15 auto insurers, has now seen that number shrink, highlighting a significant reduction in choices for consumers. Some industry experts warning of a possible 35% across-the-board rate increase if approved by the California Department of Insurance. This sharp increase in premiums has caught many policyholders unexpectedly and is leaving them with financial burdens that they were not prepared for. For some, the rising costs of insurance are impacting their ability to afford other expenses, such as vacations, bills, and everyday necessities, underscoring the real-world consequences of the state's insurance woes and the urgent need for a solution to stabilize and make car insurance more accessible for Californians.

Consumers are urged to contact their Agent and review their policy coverage and all rating information to ensure they have all available discounts and that the coverage they are purchasing meets their needs.  Reviewing all Group Discounts that are available, adding Multi-Policy Discounts, utilizing available Mileage Verification Discounts, and amending limits and deductibles as well can result in substantial savings.

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