Allstate will stop writing new homeowners and landlord insurance policies in California as of July 1, the company announced Thursday, rather than join other companies that have heeded a push by regulators to slash rates by $1 billion.
Allstate said that while it will continue to provide coverage to existing property insurance customers in California, its agents will refer customers seeking new policies to another company, Pacific Specialty Insurance Company, not affiliated with Allstate.
In a press release, Allstate noted that it filed a request with state regulators in September for a 12 percent rate increase, which is still pending.
The request for a rate increase flew in the face of an order by California Insurance Commissioner John Garamendi for Allstate, State Farm, Farmers and Safeco Insurance to justify their rates after a study concluded the companies paid out less than 50 percent of homeowners insurance premiums on claims.
In December, the state’s second-largest homeowners insurer, Farmers Insurance, said it would lower its rates in the California by 18 percent, joining State Farm, Safeco, Hartford, USAA, Nationwide and Kemper in responding to Garamendi’s push for rate reductions.
Garamendi’s successor as insurance commissioner, Steve Poizner, issued a statement calling Allstate’s decision “short sighted” and promising to monitor the company to make sure it doesn’t overcharge existing customers and fulfills its contractual obligations to them.
“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,” Poizner said. “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 said reductions by other homeowners insurers have saved customers more than $1 billion.