Goodbye and good riddance to Allstate’s excessive rates and overcharges, said consumer advocates, in response to the insurer?s announcement that it will stop selling new homeowners insurance policies in California.
The Foundation for Taxpayer and Consumer Rights (FTCR) said Allstate’s decision is part of an ongoing effort by the company to bully the state into allowing unwarranted rate increases.
Allstate has been making outrageous profits on its California homeowners business in recent years, said FTCR, noting the company paid out just 33.6 cents on the premium dollar in homeowners claims in 2005 and just 25 cents on the dollar in 2004. Apparently Allstate wants more: the company has requested another rate increase of approximately $100 million.
Using voter-approved Proposition 103, FTCR is seeking to block that increase and is also urging Commissioner Poizner to order a 40% reduction in Allstate’s current rates. This would save homeowners an average of $426 annually, not including refunds of prior overcharges to policyholders.
“Allstate can’t bully California into accepting outrageously high rates by threatening to take their coverage and go home,” said Carmen Balber 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.”
Whether or not the insurer stops selling new homeowners insurance in California, the challenge to Allstate’s rate increase request by the Insurance Commissioner and FTCR will continue. In fact, as a result of Allstate’s announcement, FTCR is likely to demand even larger reductions for existing policyholders than the 40% decrease currently proposed by the group. If only serving existing customers, Allstate will not have additional administrative costs associated with new business and will have less uncertainty about their overall risk exposure.
Insurance companies are required, under Proposition 103, to justify any rate changes and are prohibited from charging excessive premiums. Using these rules, FTCR worked with the California Department of Insurance last year to reduce rates for homeowners insured by State Farm, Safeco and Farmers by more than $450 million. Other companies including USAA and Hartford also lowered homeowners rates last year. Allstate stands out as the only major insurer resisting rules requiring them to reduce customer premiums, but will be required to lower rates if Commissioner Poizner determines their rates are excessive as part of the current hearing concerning Allstate?s rates.
Consumer advocates said that the Commissioner, lawmakers and insurance customers should let Allstate know that Californians do not look kindly on this effort to jump in and out of the California market.
“California is the largest insurance market in the nation and if Allstate wants to walk out on California customers, plenty of other companies will quickly fill their place. But Allstate and its shareholders must understand that if they want to leave, they won?t be welcome back any time soon,” said Balber.