USAA, a major insurance provider, announced on November 26 that it will raise its home insurance premiums in California by an average of 25.9% starting December 1. This marks a significant increase even for USAA, which traditionally offers the most affordable insurance services to active military personnel and veterans in the state.

According to Insurance Business Magazine, some policyholders could see hikes as high as 48.5%, particularly those living in wildfire-prone areas. USAA’s average annual premium currently stands at $799.

USAA has also announced sweeping rate hikes across its subsidiaries. For example, "USAA Comprehensive Protection" implemented an average 30.6% increase mid-November, while "USAA Garrison" plans to raise premiums by 25.5% early next year.

The company attributes these increases to adjustments in basic rates and ongoing wildfire-related litigation. They explained that premium calculations are based on wildfire data from the U.S. Forest Service and private providers.

USAA’s market share in California's homeowners insurance sector has declined slightly in recent years, dropping from 5.73% in 2019 to 5.4% in 2023. However, the premiums paid by policyholders rose significantly during this period, from $523.1 million in 2019 to $741.7 million in 2023.

Other insurance companies in California have also raised premiums. Allstate implemented a 34.1% increase earlier this month, affecting 350,000 policyholders — the steepest hike in California over the past three years. In May, Travelers Insurance raised its premiums by an average of 15%, impacting over 320,000 households.

Nationwide, average annual home insurance premiums have surged by 55%, rising from $1,108 in 2019 to $1,723 in 2023, according to the National Association of Insurance Commissioners. In states prone to natural disasters, such as California, premiums are expected to increase by an additional 23% this year.

California's sharp premium increases are driven by frequent natural disasters, particularly wildfires. Losses due to natural disasters in California are 14% higher than in other states.

The state’s dry climate and worsening weather conditions exacerbate the wildfire crisis. According to state data, 7,818 wildfires have burned over 1,044,126 acres this year, damaging or destroying 2,077 homes. In contrast, 7,386 wildfires in 2022 burned 332,822 acres, affecting 179 homes.

Insurance companies cite rising natural disaster frequency and escalating damage costs as key drivers of these increases. Additionally, inflation following the COVID-19 pandemic has led to higher costs for home repairs, materials, construction, and labor, further contributing to the premium hikes.

By Hongyong Park

<Hongyong Park>