Coastal Insurance Reverses Plan, Will Keep Policyholders
Coastal Insurance Co., which in October announced plans to shift the 225,000 auto policyholders served by it and its affiliates, FGS and Public Insurance Service, to an out-of-state company, has now sent out notices that it intends to keep its customers after all--as long as they pay their bills.
“Coastal Insurance Co. withdraws the notice of non-renewal which was sent to you in October,” the company told its policyholders, 80% of whom are Southern Californians, in a mailing that arrived in most homes over the weekend.
“Your present policy will remain in force unless you fail to pay your monthly policy billings by 12:01 a.m. of the due date shown on your monthly billing or unless you otherwise cause your policy to be canceled.”
Coastal is the largest seller to have said either before or after the November election approval of Proposition 103 that it was either abandoning the auto insurance business in California or transferring its customers to another company.
The firm’s plan had been to transfer its customers to United Equitable Insurance Co. of Illinois on the apparent assumption that an out-of-state company could offer new rates not subject to Proposition 103’s rate rollbacks. Coastal’s chief executive, Harry O. Miller, said Monday that Coastal had been planning to buy the Illinois company but the plan had fallen through.
Coastal’s latest announcement is in accord with provisions in Proposition 103 prohibiting a company from refusing to renew auto policies unless premiums have not been paid, there has been “fraud or material misrepresentation” in claims or there has been “a substantial increase in the hazard insured against.” Those provisions were among those allowed last week to go into effect by the state Supreme Court.
However, Miller said his company’s change of course mainly reflects business considerations.
First, Miller said, the Supreme Court has continued to stay, apparently for several months at least, the rate rollback provisions of Proposition 103, so it is evident to Coastal that it can continue in the insurance business for the near future without losing money.
Second, he noted, a competitor has been conducting an intensive advertising campaign seeking to drain away Coastal’s customers by making hay out of the company’s earlier non-renewal and transfer announcements. Miller said Coastal has lost 15,000 customers since October and now has 210,000 policyholders.
Third, he noted, the state Insurance Department has made clear its opposition to what Coastal announced in October.
Miller said Coastal plans to keep all its liability policies in force, but some customers who also hold comprehensive and collision coverage may find those portions of their policies transferred to a new carrier because of pending changes in other Coastal business relationships. Those customers will get a notice on that shortly.
State Insurance Commissioner Roxani Gillespie expressed satisfaction Monday at the company’s change of position.
“The company has not communicated to us” about its latest moves, she said. “But we told them in October that in our opinion any non-renewal, if Proposition 103’s non-renewal provision was made effective . . . would not be legal.”
Only one company, Travelers Corp., continues to hold to an announced policy of getting out of the auto insurance business in California. It has notified its 24,000 auto policyholders that they will not have their policies renewed. But the state Insurance Department has questioned the legality of these notices.
‘Extend Coverage’
In another development Monday, it was learned that Fireman’s Fund, another insurer that said last month it was getting out of the auto insurance business, is now telling its customers that it will “extend coverage” on their policies for six months but makes no promises after that.
Company spokeswoman Nancy Arvay said Fireman’s Fund is “assessing the situation . . . and it is evolving day by day.” She added that the company hopes that the Supreme Court will rule on the validity of the rollbacks called for in Proposition 103 within six months.
Some Fireman’s Fund customers have recently received large rate increases in their auto policies, but Arvay said these probably are people who are only now seeing a rate increase that was announced last May.
Meanwhile, 20th Century Insurance Co., the sixth-largest seller of auto insurance in California, sent a notice to its customers saying that pending a resolution of the court case challenging Proposition 103, “we will continue to charge existing insurance rates.”
This indicated that 20th Century will not attempt to take advantage of a loophole left by last week’s Supreme Court ruling that allows rate increases while the court case proceeds. 20th Century is the first large carrier to make such a pledge.
