Dollars and Jens
Friday, May 11, 2007
Allstate Corp., the state's third-biggest home insurer, will stop selling new residential policies in California.Sounds reasonable, no? Risks within one state are going to be highly correlated. This is good for their shareholders, good for policyholders in other states, and good for existing policyholders in California, none of whom should want Allstate to take on potential liabilities they aren't good for.
The Northbrook, Ill., company announced the July 1 cutoff Thursday afternoon, saying it needs to better manage the risk of potential losses from wildfires and earthquakes that might strike the Golden State.
"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 Barge, the insurer's field vice president for California.
Spokesman Rich Halberg stressed, however, that the insurer will continue to renew coverage for the 1 in 7 California homeowners that it already insurers.
Here's the reaction from some self-appointed consumer group:
Advocates for policyholders say they want California Insurance Commissioner Steve Poizner to take a tough stance on Allstate if the company insists on limiting its California exposure. They want the commissioner to prohibit the company from returning to the market for at least 10 years.
"It would be completely unfair to California customers if Allstate tries to treat the California market like an accordion, coming in when business is good and then walking out," said Douglas Heller, president of the Foundation for Taxpayer & Consumer Rights in Santa Monica.