Allstate Lifts California Auto Policy Restrictions Following 30% Rate Hike

Allstate has stopped requiring a 50% down payment for new car insurance policies in California as of Feb. 7, following a settlement with state insurance regulators and a consumer advocacy group that greenlighted a 30% rate increase for the insurer.

“We feel comfortable writing business in California given the rate level we’re operating at,” the company’s president of property and liability, Mario Rizzo, said in a Q4 earnings call, P&C Specialist reported.

Allstate is the fourth-largest U.S. auto insurer by market share, according to the National Association of Insurance Commissioners. It accounts for about 12% of California’s auto insurance market, state data shows.

Allstate’s down payment restriction

In July 2022, the Northbrook, Illinois-based Allstate began requiring 50% down payments on new auto policies. While a down payment is a standard requirement for new car insurance policies, most insurers either accept the first month’s premium as a down payment or charge a low percentage of the annual premium.

The average annual cost for car insurance in California ranges from $1,500 to $1,999, according to Insurify data. Allstate’s restriction meant consumers buying a new policy for a $1,500 total premium would have to pay $750 up front and the remaining $750 in installments. By comparison, a standard down payment of one month’s premium would have been about $125.

California insurance regulations

Like other states, California requires insurance companies to get approval from the state department of insurance for any rate increases. Additionally, California’s Proposition 103, passed by voters in 1988, allows consumer advocates — referred to as “intervenors” — to participate in the negotiation process for rate approvals.

The non-partisan consumer advocacy organization Consumer Watchdog acted as an intervenor in Allstate’s 2023 application for a 35% auto rate increase. It’s also an intervenor in multiple other rate-increase applications from other insurance companies selling home and car insurance in California.

Allstate’s settlement stipulation

The California Department of Insurance, Consumer Watchdog, and Allstate negotiated the insurer’s rate increase application, reaching an agreement that:

• Allows Allstate to increase rates 30% after Feb. 7, 2024

• Prohibits Allstate from getting a subsequent rate increase before Aug. 7, 2024 (although the insurer can apply for an increase before then)

• Requires Allstate to offer the same payment plan options for both new and renewing policies — effectively ending the 50% down payment requirement for new policies

What’s next?

Significant losses in 2022 prompted Allstate to reduce its business in California. But the insurer reported a fourth-quarter profit of $1.3 billion in 2023, according to P&C Specialist. Of that profit, $93 million came from Allstate’s car insurance business.

While the settlement between Allstate, the state DOI, and Consumer Watchdog means many drivers buying a new policy from the insurer will face more standard down payment costs, they could still be paying a higher total premium. The insurer’s average annual car insurance rates in California will increase between $450 and $600, based on Insurify data.