Insurers Dropping More Customers Who File Claims
Chicago Sun-Times - June 23, 2003

Been dropped by your insurance company? You're not alone.
Mirzad Gacic of Chicago was stunned to receive a letter earlier this month from Allstate Property and Casualty, which said it would not renew his auto policy because of two accident claims totaling $3,900 filed in March. Allstate said Gacic could apply for insurance through Allstate's high-risk auto division.
"Allstate always says you are in good hands. Obviously, I'm not," he said.

Home and auto insurance companies, including Illinois-based insurers Allstate Corp. and State Farm Mutual Insurance Co., are dropping more of their customers for filing even as few as one or two claims, industry experts say.
"Right now, we are in a classic hard market, which means essentially the cost of insurance for companies is higher so it is more expensive to offer," said Jeanne Salvatore, spokeswoman for the New York-based trade group Insurance Information Institute. "Over the last 10 years we've paid out more in claims than we took in in premiums."
How many customers are receiving rejection letters from their insurance companies isn't public information, but both industry types and consumer groups confirm the rising numbers.

Complaints against insurers have been rising in Illinois, according to insurance regulators, over everything from claim handling to underwriting standards. In 2001 (the most recent year for which statistics are available) homeowners insurance complaints jumped 59 percent from the previous year, the Illinois Department of Insurance reported, while auto insurance gripes rose 11 percent and complaints against health insurers dropped 19 percent.
Insurance companies say they're battling their own tough times. Last year, U.S. property and casualty insurers made a combined $2.9 billion of profits--after losing a whopping $7 billion in 2001, according to the insurance trade group.

Northbrook-based Allstate earned $1.13 billion last year, after earning $1.16 billion in 2001. Those annual profits are the lowest for the company since 1994. Bloomington-based State Farm, by comparison, lost $5 billion in 2001 and $2.8 billion last year.

It may seem like more customers are being cancelled, Allstate says, but the insurer is happy to keep most of its customers: It drops less than one-half of 1 percent of its auto customers a year, spokesman Mike Siemienas said.

Insurers blame the higher cost of repairs and higher-than-normal incidents of bad weather, such as wind storms, hail, and hurricanes. New homes being built, particularly on the East Coast, have been expensive for insurers this year because of bad weather in that part of the country.

Mold claims in Texas and high costs associated with auto claims are also factors, the industry says. When insurers were nailed in 2001 by an epidemic of mold in homes in Texas and the southern United States, insurers lost big time. Insurers up to that point didn't factor in runaway mold into their premiums.

STAYING COVERED

What can you do to protect your insurance coverage?
Keep higher deductibles. That makes premiums cheaper, and if you can avoid accidents, it saves money.
Limit the claims you file. Save your claims for big disasters, like fires, rather than minor ones.
Shop around for a better deal. Invest some time on the phone and Internet, and you can find some bargains in the market.
Ask why. J. Bob Hunter, director of insurance for the Consumer Federation of America, a Washington-based nonprofit consumer advocacy group, says customers who are dropped by their insurance companies have a right to know why they were dropped.
Call the state regulator's hotline. The Illinois insurance regulator's office has a toll-free hotline at (866) 445-5364. Insurers must follow state laws when declining to renew a customer, and customers can call and ask about their non-renewals and file complaints.

(C) 2003 Chicago Sun-Times.