Safeco Stops Selling Home Insurance
Safeco, the seventh-largest seller of homeowners insurance in California, announced Wednesday that it will not sell any new policies in the state, although it will continue to service the customers it has.
The move was explained by company spokesman Paul Hollie as a reaction to an emergency regulation promulgated this week by state Insurance Commissioner John Garamendi that restricts insurers’ rights to choose their customers on the basis of past claims history.
“This regulation leaves us with an inability to set aside adequate reserves to meet possible losses from wildfires or storms,” Hollie said. “We feel our first responsibility is to our current customers.”
At the same time Safeco announced its stand, three insurance industry lobbying organizations in Sacramento went into Superior Court to seek a stay of the Garamendi regulation, which went into force Monday, while it is reviewed by the courts.
After Judge Raymond M. Cadei refused to issue a stay, Jerry Davies, a spokesman for the Personal Insurance Federation, one of the lobbying groups, said the matter would be appealed to the Court of Appeal.
The regulation by Garamendi restricts the right of insurers to use the records of a group known as CLUE -- the Comprehensive Loss Underwriting Exchange -- in deciding whom not to insure.
One of the features of this group is that it keeps claims records by property rather than just by an owner, so a buyer may not be able to get insurance because there has been a claim by the prior owner.
Garamendi for months has been critical of this system, calling it unfair. Months ago, he issued an advisory to the companies not to use such criteria. After they protested the advisory as having no force of law, he wrote the emergency regulation.
Safeco, with 240,000 customers, is not the first company to restrict sales of homeowners policies in California. The largest seller in the state, State Farm, also has such limits, and there were suggestions by industry sources Wednesday that other companies may decide to restrict sales unless Garamendi backs down.
After the 1994 Northridge earthquake, many companies restricted sales until the Legislature created a state authority to sell earthquake insurance, partly taking the industry off the hook.
Garamendi, since being elected commissioner for the second time in January, has often stated that he hopes to protect consumers while at the same time getting along with the industry.
As he and other commissioners have found, every time steps have been taken to control industry practices adverse to consumer interests, they have ended up in a bitter fight with one of Sacramento’s most powerful lobbies.
Garamendi spokesman Norman Williams had a restrained reaction Wednesday to Safeco’s move, saying the commissioner wants to make sure that insurer use of outside agencies such as CLUE is “appropriate.”
Another Garamendi drive, to restrict the use of credit scoring in decisions about selling insurance, has also riled the insurers, whose lobbyists have fought off legislative bills that would do the same.
