Come July, Allstate to Stop Writing Homeowner's Insurance

Allstate Corporation, California's third-largest home insurance provider, has announced it will stop writing homeowners insurance policies beginning July 1. Instead, Allstate agents will refer customers to a third-party insurance company. Full Focus reporter Heather Hill has the story.

Beginning July 1, Allstate insurance won't write any new homeowners insurance policies in California.

Some in the insurance world consider California to be a 'catastrophe-prone' state. San Diegans are all-too-familiar with the wildfires that ravaged the countryside in 2003. Pete Moraga of Allstate says on top of fires and earthquakes, predictions of increasing severe storms play a role in the company's decision.

Moraga : We know we're going into that cycle now and we don't know how long that's going to last. And again, if it's because of global warming, we know the effect is going to be much longer term.

California Insurance Commissioner Steve Poizner has called Allstate's move "a short-sighted business decision." He also questions the company's call for a 12-percent increase in its premiums. Now Poizner is issuing an order for Allstate to show it's not overcharging current customers.

Moraga says increasing construction costs in the state are behind the request for a rate increase. He says the company didn't raise rates after the wildfires as many other companies did.

State Senator Christine Kehoe of San Diego authored the 'Homeowners Bill of Rights' after the 2003 wildfires. She offered this response to Allstate's announcement.

Kehoe : Allstate is being heavy-handed in acting to protect their bottom line. These arbitrary decisions by business are exactly what forces government to intervene to protect its citizens. If they can pull out of California at will, they wreak havoc with the rates. This is unfair to California's homeowners.

But Allstate representatives maintain they are limiting the growth of their business to ensure they can deliver for their customers, should a major catastrophe hit.

Moraga : Our business is not so much, or should I say, the success of our business is not so much in how many policies we sell, but it’s in how we manage our risk. That's a real key about whether an insurance company is successful or not.

Allstate says the cap on new customers won't affect the more than 900,000 Californians that already have a policy with the company.