Allstate customers in North Carolina are being faced with an ultimatum. They must bundle their homeowners and auto insurance, by purchasing both policies from Allstate. If they don’t bundle those policies, then Allstate will non-renew their homeowners insurance. It may sound as though this practice is illegal, but, it is not against the law.
It is not unheard of for people to bundle their homeowners insurance, and their auto insurance, through the same company. Often, this is a way for a consumer to save some money on the cost of both of those policies. Right now, I have my both my auto insurance and my homeowners insurance through the same company, (which happens to be State Farm).
There wasn’t anything forcing me to make the decision to get both of those policies through the same company. It simply made the most sense, financially speaking, to do it this way.
If, someday, I discover that a different insurance company will give me a better deal on my car insurance, I am free to switch from State Farm to whatever that hypothetical company happens to be. Doing so could, potentially, cause my homeowners insurance premiums to rise, but that is the only “penalty” I am likely to face.
Allstate customers in North Carolina are not being given that same freedom of choice. Allstate has recently informed 45,000 of its customers, who have homeowners insurance with Allstate, that it will non-renew their homeowners policy unless they also buy an auto insurance policy with Allstate. The customer can buy either a commercial, or private, car insurance policy. Either one is fine, so long as they buy it before December 15, 2011.
Overall, the reason why Allstate is requiring this of its customers is a business decision. Tracy Owens, an Allstate spokesperson, said:
“We wanted to be sure that we could manage our risk both now and in the future and protect the other 400,000 households we insure.”
Personally, it sounds to me like Allstate has decided that the best way for the company to make a profit was to increase the number, and the type, of policies, that it could compel customers to purchase. If a customer has a homeowners policy, and now, has to buy an auto insurance policy, then they are suddenly making more premium payments, and sending more money, to Allstate.
This will affect a lot of Allstate customers who live in North Carolina. According to documents that Allstate filed with the North Carolina Department of Insurance, the company has indicated that it will non-renew 30,400 standard homeowners policies. It also indicates that Allstate will non-renew 10,500 landlord packaged policies, and 4,900 mobile homes policies.
Remarkably, what Allstate is doing is actually legal. All the company has to do is give its customers a 30 day notice before it cancels their homeowners policy. There isn’t any law prohibiting Allstate from requiring its customers to bundle their homeowners insurance with an auto insurance policy.
Image by Kevin Marsh on Flickr