OAI: Nonrenewals in S.C. Highlight Forced Insurance Bundling

Share Article

Allstate asks homeowners policyholders to get auto coverage too or face nonrenewal

Notices recently sent to thousands of Allstate customers in South Carolina informing them of possible nonrenewal of their homeowners policy if they did not also buy auto insurance coverage highlight earlier instances of “forced bundling” from the insurer, a practice that has sparked debate around the U.S. about its purpose, impact and legality, according to Online Auto Insurance.

In South Carolina, notices were mailed to about 10,000 Allstate homeowners policyholders who have a policy insuring the home for less than $220,000, have homes over 10 years old and lack an auto policy with the insurer. The notices informed policyholders that they would not have the option to renew their policy unless they also purchased an auto policy.

North Carolina saw similar efforts last year from Allstate, which noticed about 30,000 homeowners’ policyholders in March 2011 that they faced nonrenewal if they did not also buy auto coverage with the insurer. Later that year, thousands of customers in Arkansas received similar notices.

Allstate representatives have said in both instances that such practices stem from larger-scale business decisions that benefit more policyholders throughout the state.

Commenting on the most recent nonrenewal notices in South Carolina, Allstate spokeswoman Nancy Lemke said the decision prioritized protection of “all of our customers.” Lemke added that the policyholders receiving notices represented only about 10 percent of Allstate's entire customer base in the state.

In an interview last year, a spokesman for the North Carolina Insurance Department said the practice is entirely legal as long as the policyholder receives the notice within 30 days of nonrenewal.

However, some state officials disagree.

In legislative debates around the nation, trade organizations, experts and consumer advocates jockeyed over what has been called forced bundling, a practice from insurers that tell policyholders they must buy multiple lines with the company or face nonrenewal.

In Maryland, a bill that ultimately stalled in a Senate committee in March sparked debate over the legality of forced bundling. The events in North Carolina were also a big point of discussion, with Maryland lawmakers fearing the state would see similar nonrenewals hurting consumers.

HB 1105 would have prohibited forced bundling throughout the state, a practice that Peter Killough, legal counsel with the state attorney general’s office, called “illegal and discriminatory” during the committee hearing.

During the debate, American Insurance Association representatives argued that the business practice isn’t as damaging to consumers as it seems because they still have plenty of other options in the marketplace.

State Farm representatives told Maryland lawmakers that they shouldn’t pass legislation without knowing the full impact of the nonrenewals in North Carolina.

Forced bundling may also signify a bigger push by insurers to focus on auto coverage that, according to the Insurance Information Institute, far outpaces other lines of coverage in profitability.

For more on this and related issues, head to http://www.onlineautoinsurance.com/coverage/ for access to an easy-to-use quote-comparison generator and informative resource pages.

Share article on social media or email:

View article via:

Pdf Print

Contact Author

Charles Nguyen
Visit website