Allstate To Cease Issuing New Homeowners Policies in Calif.

Allstate has announced that as of July 1, 2007, it will stop offering new homeowners and landlord package polices (LPP) in California. The announcement does not affect its existing property insurance customers in California.

“Allstate is taking responsible action now so that the company will continue to be in a strong position to help protect customers in California and across the country,” said Robert H. Barge III, field vice president for Allstate in California, explaining the decision. “This new strategy helps protect our existing customers and provides an alternative to California consumers looking for new property insurance policies.”

The company will continue to renew the homeowners and LPP policies of existing insurance customers that continue to own the property currently insured by Allstate. Additionally, to help Californians seeking new property insurance policies, a program has been developed to assist customers looking for new property policies in obtaining coverage from Pacific Specialty Insurance Co., a third-party insurance company not affiliated with Allstate.

In commenting on the company’s decision to withdraw from the California market, Insurance Commissioner Steve Poizner said, “Allstate’s actions in California mirror its recent retreat in other markets such as Florida and New York, and in our free enterprise system, it is their right to choose where it does business. While the writing has been on the wall regarding its intent in California, I believe this is a short-sighted business decision. I expect there will be no shortage of insurance companies who will be more than happy to compete to serve more than 1 million Allstate customers.”

Poizner noted that companies such as Farmers, Safeco, State Farm, AAA, Hartford, among others, have reduced rates for Californians by more than $1 billion, in contrast to Allstate’s actions. In Sept. 2006, Allstate filed a 12 percent increase homeowners insurance rating plan now pending with the California Department of Insurance, which it said would help it better prepare for natural disasters in California.

“Allstate’s decision to not accept new business does not entitle them to charge excessive rates,” Poizner said. “Therefore, I am issuing an Order to Show Cause for excessive rates and will force Allstate to demonstrate that they are not overcharging consumers in California. In the coming weeks, the Department of Insurance will be watching Allstate’s actions very closely to ensure that consumers are protected, and that Allstate fulfills its contractual obligations to its customers.”

The company said its announcement was the latest in a series of actions it has taken to reduce its risk in California. During the past two years, the company said it has increased the amount of defensible space required around homes in wildfire areas to a minimum of 200 feet. It also has required automatic gas shutoff valves on homes near known, active earthquake faults, to reduce the risk of a fire following an earthquake. And, Allstate purchased reinsurance contracts to help spread the financial risk posed by potential catastrophes in California.

The Foundation for Taxpayer and Consumer Rights issued a statement saying California homeowners would not miss the insurer. “Allstate has been making outrageous profits on its California homeowners business in recent years. … Allstate can’t bully California into accepting outrageously high rates by threatening to take their coverage and go home,” said Carmen Barber of FTCR. “If Allstate follows through on its playground threat, California consumers should fight back by leaving the company and moving all of their insurance business elsewhere. California doesn’t need an insurer that prefers to game the system instead of playing by the rules.”

The foundation is asking Poizner to order a 40 percent reduction in the company’s current rates, which it said would save homeowners an average of $426 annually, not including refunds of prior overcharges to policyholders.

Customers who have questions about their policy are being directed to contact Allstate directly, or call the Department of Insurance Hotline at 800-927-4357.

Source: Allstate, DOI, FTCR