The company said it will continue to serve customers with existing homeowners policies and that it will renew those policies when they expire. The company also will continue to offer new policies, and serve existing ones, for other lines of insurance, such as automobile coverage. Allstate also said it would stop providing new landlord insurance policies.
"This is California," said Rich Halberg, an Allstate spokesman. "It is a very catastrophe-prone state. It is home to some of the most damaging catastrophes in the country."
Allstate is the No. 3 provider of homeowners insurance in California, the company said. In 2005, the most recent year for which figures were available, the company wrote $844.9 million in homeowners insurance premiums.
The company will cease offering new homeowners policies on July 1. Allstate will refer new customers to Pacific Specialty Insurance Co., which is not affiliated with Allstate.
Allstate was one of the few homeowners insurance carriers that proposed a rate increase in recent filings with the state Department of Insurance. Allstate said the decision to retreat from the new policy arena for homeowners had nothing to do with its attempt to raise rates. The company has proposed a 12 percent increase.
"This new strategy helps protect our existing customers and provides an alternative to California consumers looking for new property insurance policies," said Robert Barge, field vice president for Allstate in California.
Allstate could be making a mistake by deciding to terminate the writing of new homeowners policies, state Insurance Commissioner Steve Poizner said.
"While the writing has been on the wall regarding its intent in California, I believe this is a short-sighted business decision," Poizner said in a news release. "I expect there will be no shortage of insurance companies that will be more than happy to compete to serve more than 1 million Allstate customers."
Other insurance companies, including Farmers, Safeco, State Farm, AAA and Hartford, had previously reduced rates for California homeowners by more than $1 billion, Poizner noted. Those rate cuts are in "direct contradiction to Allstate's actions," Poizner said.
"We have room to write more homeowners policies," said Lonny Haskins, a State Farm spokesman in the Bay Area. "We don't write like wild people, but we have room to add on. If somebody had been thinking of bringing their business to Allstate, the customer should be in a good position if they have to go elsewhere." State Farm is the largest homeowners insurance provider in California.
Farmers Inc. Group, the No. 2 homeowners carrier, also is poised to snap up potential Allstate customers.
"We have no plans to modify the way we operate in California," said Jerry Davies, a Farmers spokesman in the state. "Our agents are in place throughout California."
Allstate said it has halted the writing of new homeowners policies in Florida, Connecticut, Delaware and New Jersey. Allstate also has trimmed its activity elsewhere, said Mike Siemienas, an Allstate spokesman. "We have limited our writing along the Gulf Coast and the Atlantic Coast," Siemienas said.
Allstate appears to have curbed its homeowners activity more sharply in California than anywhere else, even though the state's highest-profile disaster, major earthquakes, occur at erratic intervals compared with hurricanes.
During the first quarter of 2007, Allstate reduced its new homeowners policies by 31 percent in California and by 15 percent in what it calls hurricane exposure states compared with the same period the year before. Nationwide, Allstate reduced the writing of new homeowners policies by 12 percent, according to a recently released company financial report.
A consumer group said it was glad to see Allstate exit the new policy business for homeowners. The company was out of step with other insurers, said Carmen Balber, a consumer advocate with the Foundation for Taxpayer and Consumer Rights.
"Hasta la vista, Allstate," Balber said. "Consumers are better off without them."
Rather than a 12 percent increase, Balber said she believes Allstate should cut rates 40 percent, for a savings of $426 a year for homeowners.
"This is an attempt by Allstate to bully California to allow them to continue charging excessive rates to homeowners."
Allstate officials, though, say the move simply shows the company acting in a prudent fashion.
"We don't want to add to the level of risk we have in California," Halberg said. "We want to be in a strong position for our existing policy holders."
George Avalos covers the job market, insurance, petroleum and banks. Reach him at 925-977-8477 or firstname.lastname@example.org.