Citing poor financial performance at its Allstate Property and Casualty Insurance division, Allstate Insurance Co. announced it was moving 264,000 personal auto customers—12 percent of its customers in Texas—to its unregulated business unit, Allstate County Mutual Insurance Co.
According to the Austin American Statesman, Allstate began informing customers last month of the move; customers will be transferred through March 2003. Some 26,000 customers have been notified so far.
Because the Texas Depart-ment of Insurance has not allowed Allstate to raise rates for customers that have filed claims, company spokesman Justin Schmitt asserted that it has had to either decline renewals or provide coverage through affiliated companies. The customers currently being transferred have had claims.
The TDI will meet with Allstate representatives next week to discuss the issue, along with other matters. Department spokes-man Lee Jones said, “They wouldn’t notify us if they were (moving customers to unregulated units) … This is something that Allstate either announced, or the Austin American Statesmanfound out about it because somebody came to them.”
Three Allstate units—Allstate Indemnity Co., Allstate Property and Casualty Insurance Co., and Allstate County Mutual Insurance Co.—write more than 16 percent of the Texas personal auto market, making it the second-largest carrier behind State Farm (more than 22 percent). According to a State Farm spokesman, that company has no plans to migrate large numbers of customers to any of its unregulated units.
Estimates indicate that by late 2002, a third of Texas’ more than 8 million drivers will be insured through county mutuals and other unregulated insurers. The marketing efforts of Progressive County Mutual Insurance Co. has proven a prime factor in this trend—it ranked as the fifth-largest auto insurer in the state in 2000.
Rob Schneider, senior staff attorney at the Southwest regional office of Consumers Union, told the Statesman that there are similarities between the auto insurance situation and the current homeowners crisis, although he conceded the auto market is not yet as bad.
According to Dan Lambe, executive director of Texas Watch, insurers are not obligated to disclose what criteria they use to place customers in unregulated units—they could move even low-risk drivers into county mutuals based on credit history alone. He claims there are no valid studies correlating credit rates and driving records, and that carriers are just trying to avoid state regulations preventing them from raising rates and increasing profits.
The number of Texas drivers insured by county mutuals and other unregulated units has increased from 21.4 percent in 1991 to 27.5 percent in 2000.