Deerbrook Insurance To Leave Calif.

Deerbrook Insurance Company, a writer of nonstandard personal lines auto insurance, is leaving California because the long-term prospects for profitability are just not there, a company executive said.

The company, a subsidiary of Northbrook, Ill.-based Allstate Insurance Group, filed its plan for withdrawal on May 31, said Roger Odle, senior state manager for Encompass and Deerbrook in California. Both companies are the independent agent distribution arm for Allstate.

Mr. Odle said that Deerbrook made its decision because the challenges within the California market "made it difficult to achieve long-term growth," which is the company's major objective.

"We feel this is the right decision for Deerbrook," Mr. Odle noted.

Deerbrook's decision does not impact any other markets the company writes in, he said, and does not affect business written by Encompass in the state or elsewhere. Encompass writes a range of other personal lines insurance throughout the United States.

Deerbrook already stopped writing new policies, and unless advised otherwise by the California Department of Insurance by the end of July, it will begin sending out nonrenewal notices by the end of this year.

Mr. Odle went on to say that Deerbrook advised agents of its plans so agents can make appropriate arrangements with their customers.

"We do not want to disrupt the insurance coverage they can provide," he said, adding that the company is confident there are plenty of other carriers available to provide coverage.

The company provides insurance in 18 states, excluding California. According to National Underwriter's Highline Data service, California accounted for 34 percent of the company's direct written premium in 2006 at more than $25 million. It was followed by Florida, which accounts for 21 percent at $16 million. The company reported total direct written premium of $75.45 million in 2006.

The action, Mr. Odle said, is not tied to Allstate's decision to no longer write new property business in the state, which received heavy local criticism. The independent agent company operates separately from Allstate's exclusive agent operations, he explained. He also said the company re-evaluates its markets, possibly indicating a return to the state is not ruled out in the future.

In terms of automobile insurance, according to Highline Data, Allstate is ranked fifth in the marketplace, with $1.84 billion in direct premium written. Deerbrook would account for less than 2 percent of Allstate's market in the state and less than 1 percent of the total auto market in California in terms of direct premium written.

Molly DeFrank, deputy press secretary for the California Department of Insurance, said that other insurers are not following Deerbrook's move and the automobile market "remains steady."

Earlier this week, California Insurance Commissioner Steve Poizner extended the state's low cost automobile insurance program to nine counties, making it available in a total of 31 counties.

The program allows low-income good drivers to purchase liability coverage for under $400 a year.