SACRAMENTO — Allstate Corp., the third-largest insurer of homes in California, may soon cut back on its policies or stop writing them in the state altogether, insurance experts say.
In the last year, the Northbrook, Ill., company and other insurers have ceased writing new homeowners policies in all or parts of a dozen coastal states that are regularly hit by hurricanes.
California may be next, say insurance experts and lobbyists -- including former Insurance Commissioner John Garamendi, who is now state's lieutenant governor.
Allstate declined to comment on its plans.
Although most of the state's major home insurers are cutting rates, Allstate, citing California's potential for natural disasters, is seeking a 12% rate increase from its policyholders. It insures about 1 in 7 homeowners in California.
"Their strategy is an exit strategy," said Garamendi, a Democrat who oversaw Allstate rates for the last four years as insurance chief. "They've said they want to get out of the homeowners business in a market that is competitive, healthy and profitable." He called such a move "stupid."
Allstate says it needs the rate increase to build its reserves to pay future claims arising from the wildfires and earthquakes that plague the Golden State.
"The costs of protecting against losses have gone up dramatically," said Rich Halberg, a California spokesman for Allstate. "They are costs that we believe should be reflected in rates."
Asked whether there were plans for a moratorium on the sale of new homeowners policies, he said, "We are open for homeowners in California who meet our requirements."
He added, "We are constantly managing our level of risk.... We have a broad array of tools."
Mike Siemienas, a national spokesman for Allstate, said the company would not discuss its plans for California. "We don't speculate on what future actions we're going to take."
The state's new insurance commissioner, Steve Poizner, said he was tracking Allstate's moves in other parts of the country and analyzing its California rate proposal.
Halberg said Allstate was not worried that higher rates would drive away customers. "We believe we'll be competitive in the market -- even with this increase," he said.
The company submitted its request for a rate increase in response to a legal order from Garamendi to it and three other major insurers to open their books and prove they were not overcharging policyholders.
