Allstate Wants to Trim Number of New Car Policies

Allstate Insurance Co., one of the top five auto insurance sellers in California, confirmed Friday that the company is seeking “lawful and prudent” ways of reducing the number of new policies it underwrites in the state.

Company spokesman Jim Dudas said Allstate has held meetings with agents to explore steps to reduce the number of new policies it is writing. Allstate, which has 1.7 million customers, said it had a 60% increase in new auto insurance customers last year.

The company is concerned that it is writing a disproportionate share of new auto insurance policies in California at a time the cost of claims continues to escalate. Recent efforts to pass reform legislation to curb those costs have failed.

Dudas made the statements when questioned about a recent meeting of agents in Orange County in which a company official reportedly said Allstate was considering requiring its agents to take a number of steps to discourage new business.

The agent, who asked not to be identified, said the official said the company may prohibit agents from advertising in the Yellow Pages. Also, the company may require prospective customers to submit driving records obtained from the state Department of Motor Vehicles before they could be issued policies. Another step would require all new customers to pay their premiums six months in advance.

The agent contended that such rules would so discourage new business that many Allstate agents would be ruined economically.

Dudas would not discuss specifics of what Allstate was considering, saying no final decisions had been made. He said that when such decisions are made, they will be discussed privately with the company’s agents first.

But word that Allstate is seeking to reduce sales of new policies brought a quick expression of concern from state Insurance Commissioner John Garamendi. The commissioner fears that if other companies follow Allstate’s lead, it could lead to restricted availability in the already tight California auto insurance market.

“The commissioner has been hearing various reports of these Allstate meetings that are taking place,” said Elena Stern, spokeswoman for Garamendi. “He has launched a preliminary examination of the information we have received to determine if we need to do a more thorough investigation.”

Under the “take all-comers” provision of Proposition 103, insurers are required to accept all drivers who approach them with a good safety record. This is defined as having no more than one minor traffic violation or one at-fault accident in the previous three years and also as having at least three years of driving experience.

Stern noted, however, that this provision does not rule out moves by companies to make it inconvenient for drivers to obtain insurance.

This appears to be what Allstate is considering doing. Requiring each driver who wishes to be insured to go to the DMV, pay $5 and then take the record obtained to the agent would make it more inconvenient to buy from Allstate.

“The commissioner is committed at the strongest level that the ‘take all-comers’ clause of Prop. 103 be enforced, and it will be completely,” Stern said. “Based on the information we’ve received so far, at face value it appears that what they’re thinking of doing is legal.

“If, however, additional information shows that they are imposing unreasonable barriers to the purchase of auto insurance, we would consider further enforcement action.”

Dudas said Allstate, the Northbrook, Ill.-based subsidiary of Sears, Roebuck & Co., does not know what has caused the increase in business. “But we’re convinced we’re getting a disproportionate share of the market,” he said. “We want to find out why we’re writing so much of this business and seek a way to best deal with it.”

The company spokesman gave no numbers on how many policies last year’s 60% increase in new business represents, calling that proprietary information. Most of the company’s business, however, is old customers.

Dudas said Allstate’s desire to restrict sales had no connection with the recent defeat of a no-fault auto insurance bill in the state Legislature. Allstate, like many companies, strongly supported the no-fault bill as a mean of halting an increase in claims.