Senator Feinstein Expresses Concern Over Decision By Allstate To Stop Offering Homeowners Insurance In California
Jul 12 2007
Washington, DC – U.S. Senator Dianne Feinstein (D-Calif.) has called on the President and CEO of Allstate Corporation to reassess his company’s decisions to increase rates for current policyholders in California and stop writing new homeowners insurance policies in the state.
“It is unacceptable, in my view, for large national insurance companies such as Allstate to cherry pick areas of coverage,” Senator Feinstein wrote. “Additionally, the timing of your company’s decision is particularly troubling in light of the growing opposition to Allstate’s efforts to raise its homeowners insurance premiums in California.”
Senator Feinstein requested additional information on the rationale behind Allstate’s recent repositioning in California.
The following is the complete text of Senators Feinstein’s letter:
July 11, 2007
Mr. Thomas J. Wilson II
President and Chief Executive Officer
2775 Sanders Road
Northbrook, IL 60062-6127
Dear Mr. Wilson:
Believe it or not, I was pleased to meet you recently at the Aspen Ideas Festival. Per our discussion, I write to follow-up with my concerns regarding Allstate’s decision to stop offering new homeowners insurance policies in California.
Your company generated a record $5 billion profit last year. In California, Allstate wrote nearly $900 million in homeowners insurance premiums. Allstate paid out only 29 cents on the premium dollar in California homeowners claims in 2006, below its national average of 34 cents. With such successes, I am surprised that Allstate would conclude that it is preferable to stop taking on new homeowner clients in the most economically dynamic state in the Nation.
Californians are fortunate that our state has strict laws in place to prohibit insurance companies from engaging in exploitative practices. Nonetheless, I am concerned that Allstate’s actions could encourage other companies to follow suit and pullout of disaster-prone or storm-vulnerable areas—limiting exposure to risk in order to maximize profits, while consumers are left with dwindling options. It is unacceptable, in my view, for large national insurance companies such as Allstate to cherry pick areas of coverage.
Additionally, the timing of your company’s decision is particularly troubling in light of the growing opposition to Allstate’s efforts to raise its homeowners insurance premiums in California. The largest insurance companies in our state, State Farm and Farmers Insurance, recently cut premiums for California homeowners by 20 and 18 percent, respectively. Allstate has chosen to buck this trend, moving its premiums in the exactly opposite direction. Such a decision—hiking premiums on nearly one million homeowners in California—does not appear to reflect the market realities in our state.
I encourage you to reassess whether the decisions to increase rates for current customers and stop writing new homeowners policies are truly in the best interests of Allstate and its many policyholders in California. In the meantime, I would be most appreciative of any information you can provide that offers further insight into the decision-making process and rationale behind Allstate’s recent repositioning in California.
United States Senator
cc: The Honorable Steve Poizner, California Insurance Commissioner
Mr. George E. Ruebenson, President, Allstate Insurance Company