Allstate Insurance Agrees To Comply With N.Y. Order On Tie-In Renewal Ban

Allstate Insurance Company and its affiliates “have agreed to comply fully” with a directive by the New York Insurance Department prohibiting carriers from refusing to renew homeowners policies unless they also have auto or life coverage with the same insurer, Insurance Superintendent Eric Dinallo announced last week.

Allstate had been called on the carpet by the department for allegedly ignoring a directive against nonrenewing coastal homeowners customers who haven't bought any of the carrier's other products.

The department said it issued its citation–which carried the possibility of civil penalties–after Allstate refused to comply with an Aug. 28 Circular Letter directing all property-casualty insurers to discontinue the practice of nonrenewing homeowners policies based upon whether the policyholder had other coverage with Allstate or its affiliates.

On Aug. 31, the department issued a citation to Allstate following the company's refusal to comply with the circular letter. The citation set a Sept. 19 hearing.

“Since Allstate has now agreed to fully comply with the circular letter, the department will adjourn the hearing and engage in discussions with Allstate about resolving the issues raised in the citation,” the department said.

While general in nature, the Circular Letter was aimed at Allstate and Liberty Mutual, which have been moving to reduce the amount of coastal properties they insure. Liberty Mutual reacted by announcing it would begin reinstating 640 downstate policies.

Tie-in business considerations in renewals are a violation of the anti-rebating and anti-discrimination provisions of the state's insurance law, the department said.

The citation had directed Allstate to appear Sept. 19 at an administrative hearing at the insurance department's headquarters in Manhattan to show cause why a formal order should not be entered requiring the company to:

o Stop conditioning homeowners insurance renewals on the existence of other insurance business.

o Reinstate policies that were improperly nonrenewed.

o Pay civil penalties for violating the insurance law.

Allstate, in a statement, said it had responded to the department in writing and also attempted to make contact with Superintendent Dinallo directly following the events of the prior week.

The company said it believed its letter addressed the concerns raised by the department, but then received notice of the Sept. 19 hearing. “We are reviewing the document and will respond accordingly,” the carrier noted in a statement at the time.

“We respect our longstanding relationship with the [state insurance department] and remain committed to working with them regarding our continued compliance with the law as we continue our catastrophe management program,” Allstate added. “We are committed to being in a strong position for our New York customers, prudently managing our exposure to catastrophic risk, and continuing our industry-leading presence in the state of New York.”

The issue of coverage for New York homeowners has recently become intensely political, with both of New York's U.S. senators raising the issue.

Last month, Sen. Hillary Rodham Clinton, D-N.Y., called on Allstate to reconsider its decision to cut back on coverage it provides on Long Island. She also asked Allstate Chief Executive Thomas Wilson for a detailed explanation on the decision to limit its business there.

Two weeks ago, Sen. Charles Schumer, D-N.Y., announced he wants Congress to act promptly on legislation creating a commission to examine the insurance marketplace, “with the goal of increasing availability and affordability of insurance in communities like Long Island,” because “they are being targeted by insurance companies for reductions of coverage.”

Mr. Dinallo's tough stance on tie-in nonrenewals is apparently a new direction for the department, which he took over this year as part of the Democratic administration of Gov. Eliot Spitzer.

Glenn Greenberg, a Liberty Mutual representative, said the criteria the carrier was using to cut coastal exposure had been presented to Mr. Dinallo's Republican predecessor, Howard Mills, in 2006, and that he gave the company no direction to change that plan.

In its citation notice, the department took note of Allstate's nonrenewal letter to policyholders telling them that among the reasons they were being dropped, “the frame construction of your property is more susceptible to hurricane losses and is close to the Atlantic Coast, where anticipated hurricane damages are highest.”

However, the letter added that “in addition, Allstate is basing its renewal offers in your area in part on whether customers had certain auto or life policies with us prior to the start of our current hurricane exposure reduction efforts on Oct. 7, 2005. You did not have such a policy on that date.”