New York–New York state insurance regulators questioned Allstate's motives today for dropping business in the New York metro area, asking if the company's plans had more to do with its push for a national catastrophe fund than lowering its risk exposure.
Executives from Allstate spent close to an hour defending the company's decision not to renew or write new home insurance business in New York City, the northern suburb of Westchester County and Long Island.
The group faced skepticism from a panel led by New York Insurance Superintendent Howard Mills, who called a public hearing on the state of the New York's homeowners market.
Mr. Mills fired a barrage of questions, asking the executives: "Is Allstate's action part of a political strategy to build for your Protect America Program?"
Allstate has been campaigning for a national catastrophe program that would involve state and federal supports for insurers.
Edward T. Collins, managing counsel for the Northbrook, Ill.-based carrier, denied this was Allstate's motive, saying, "We have no choice but to take these exposure management actions."
What perplexed the superintendent, he said, was that up until the nonrenewal announcement, the company had aggressively pursued expanding its market share throughout the state, to where it currently writes 26 percent of the state's market.
"Why is it now you are taking this draconian and drastic action?" asked Mr. Mills.
Mr. Collins said the action was a measured response to its risk exposure in light of this past year's hurricanes and evidence the hurricane season is only going to get worse.
Brian Pozzi, Allstate's regional counsel of New York, noted that while the region has not been hit by a hurricane in years, it is only a matter of time before it does happen.
"This is not a number we are comfortable with," he said, referring to the company's area market share. "This is a step we are not taking lightly."
However, the assertions did not placate other regulators on the panel.
Mark Presser, assistant deputy superintendent, demanded why, while other companies managed their growth, Allstate apparently did not, remarking that the company's actions were "irresponsible if nothing else."
"Did [Allstate] hit the snooze alarm?" he asked.
The Allstate executives pledged the company would work through its agents to give current policyholders a soft landing with other carriers and to nonrenew no more than 4 percent of the total market in a given year, by statute.
Whether the state's market is in a position to absorb that many policyholders was open to question.
Others who gave testimony said the current market is healthy, and at this time the market appears to be absorbing new customers.
However, two New York agents–Mark Hagan, chairman of the board of the Independent Insurance Agents and Brokers of New York, and George Yates, of IIABNY's public policy committee–disputed such positive forecasts.
They said that while there may be absorption of policyholders today, in June, when many policies begin coming up for renewal, it will be a different situation.
Mr. Yates said the company's 900,000 policies in force after nonrenewals translates into about 80,000 policies that would have to be absorbed by the market.
He said the attrition rate from homes being sold raises the nonrenewal rate by another 8 percent.
"We are not sure there is enough capacity," said Mr. Yates, calling Allstate's action dangerous from a capacity standpoint.
Stephen Ruchman, an agent from Long Island and past president of the Professional Insurance Agents of New York, said that he, like Mr. Yates, was mainly concerned about policyholders who lived near the shore on Long Island, and urged the regulators to closely scrutinize Allstate's move to "keep it from destabilizing the market."
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