The can’t shoot straight gang in Northbrook must be planning their year-end bonuses with extra diligence this year folks as insurance rates are going up again in a state with some of the very highest homeowners insurance premiums in the country. Either that or another ill-advised share buyback is in the offing as the money pit better known as Allstate is hungry for more of your hard-earned money and unfortunately the people of Mississippi elected an insurance lackey as their commish almost 4 years ago so the only open question was how much more price gouging Chaney was going to allow.
Anita Lee has all the skinny for the Sun Herald today as Chaney’s Allstate bob and weave bullshit finally came to an end with this 20% rate increase. I bet they are already “negotiating” the next double digit increase as we speak.
The bottom line is everyone is paying a lot more for less coverage.
Next up: Commission Chaney breaks his promise to coastal residents as wind pool rates will be going up.
sop
So Allstate agrees to increase premiums by “only” 19.4%, and to drop “only” 5,000 more Mississippi policies, and they agree that they won’t drop homeowners policies for people who also buy Allstate auto insurance. What a negotiation.
Other states, New York for example, do not allow insurance companies to require homeowners to buy their auto insurance in order to keep homeowners coverage:
http://www.ins.state.ny.us/press/2007/p0712171.htm
http://www.ins.state.ny.us/press/2007/p0709122.htm
Are Allstate rates going up across the board in Mississippi regardless of location? With a rate hike of that magnatude why doesn’t Mississippi just kick Allstate completely out, including the lucrative automobile insurance business?
Yep, statewide. Plus they are still dropping policies too.
People on the coast pay as much or more for X-wind coverage than someone in Oxford pays for a full HO policy. Something is seriously f*cked up with that too.
sop
I reluctantly weigh in on this issue. However, I feel I should bring some knowledge I have about the situation.
First, “bundling” of Auto & HO is not allowed in some states, most coastal states DOI’s have recognized carriers cannot afford to write HO only and having the Auto does improve the potential of overall profiatability for the carriers. Therefore they allow it. One cannot compare NY to MS. The difference in dollars is too large. Just the facts.
MS is not being singled out as ALL is non-renewing HO only clients in many states. One would ask why? Because the HO line has proven to be a loser to ALL and many carriers. Investors are asking carriers why they even write those policies.
I am not a supporter or critic of Mr. Chaney. I do know he is seeking out other carriers to come into MS to offer coverage. However, the geopgraphy, logistics and economy of the MS Gulf Coast does not incent companies to making an investment in writing HO on the coast.
I empathize with citizens of the coast, but private carriers are not going to make an investment in capital with potential catatstrophic loss for such a small potential return on investment.
The problem with HO in Mississippi is in the regulatory framework born of an anti trust exemption. The resulting state by state regulation means risks can not be spread across state lines. Right tail risks and the financial peril associated with such becomes magnified. The Travelers 4 Pillars Plan is an admission of what I’m saying in that it combines risks across state lines into 4 zones from Texas to Maine so underwriting becomes attractive.
Nowdy says Chaney is alright. I personally hold that BS market conduct whitewash against him so I don’t mind yanking his chain no more than he minded rat f*cking Cori and Kerri Risgby.
Now to Allstate. Auto is profitable for insurers but Allstate can’t seem to make money underiting HO as you point out Sup. The problem is consumers do like to bundle coverages in order to gin some premium savings so by not writing HO Allstate is cutting its own throat in a way. Wilson appears intent into remaking Allstate into Geico but I don’t see it happening as the results of the plans hatched by Wilson thus far have resulted in a slow crash and burn.
As always appreciate your insights Sup.
sop
If there were a competitive private market, bundling would not be an issue. Most people would prefer to bundle homeowners and auto if they get a discount for the bundle. But requiring one for the other is taking advantage of a noncompetitive market in homeowners to reduce market competition in auto.
People are forced to stay with Allstate auto and homeowners unless they can find another carrier willing to write a new homeowners policy. If they can’t find a new homeowners carrier then they also can’t shop for a better deal on auto.
Guess who writes new homeowners policies: North Light Specialty Insurance of Northbrook, IL, 100% owned by Allstate but a non-admitted carrier outside even the weak regulation of the Mississippi Insurance Commissioner. I suspect the plan behind the large homeowners rate increase request and large number of policy nonrenewals was/is for Allstate agents to move homeowners from Allstate to North Light Specialty.
Agree with SUP, he is right. Also think that it is right to make companies write homeowner insurance in the state if they are going to write auto. Auto is profitable, Homeowners is not. Especially in coastal states. Mississippi needs to follow the example as set by AL who recently, and I believe are still in the process of; forming a committee, of “qualified” people to investigate and develop a new “wind pool” program that will work. The current program is lagging far behind the need. Also develop a proactive approach for new insurers to come into the state for some competitive pricing. There is so much that could be done to improve upon what is currently being done. Proud to be from MS just always want to see better!
Step one with the windpool. Change its emphasis from being an instrument of financial pain to one that can build capital to reduce rates. Even better allow states to bundle their wind risk and access the global financial markets via cat bonds individually or as a group.
One look at those comments on the Sun Herald site and what you see is the frustration of ordinary people that are financially stretched to the limit who also get the pleasure of being price gouged for minimal wind coverage. Lots of them would sell out and leave if they could but the housing market is dead in large swaths of coastal Mississippi.
The private sector simply isn’t equipped to write premiums that are risk based as the cost of capital is too high. Being able to properly spread the risk geographically certainly helps as the folks at the Travelers have found. I’m all for a private sector solution but I’m against an industry with an anti trust exemption having it both ways.
sop
The Tom Wilson topic is a whole separate issue for those with an interest in ALL. Just check the ALL message board on Yahoo Finance. The natives are restless about the direction of the firm.
Good luck Sop on your board.
The reality here Sup is you can’t separate one issue from the other, just like the subprime debacle can’t be separated from the built in institutional incentives that caused the lemmings aka the decison makers to drive their companies off the cliff.
sop