EDITORIAL: Allstate's Black Eye
The Times-Picayune
March 8, 2007
Insurance Commissioner Jim Donelon did the right thing in ordering Allstate Insurance Co. to reinstate 4,772 homeowners policies that the company recently canceled in its latest effort to drop South Louisiana customers.
Mr. Donelon also ordered Allstate to launch a new inspection process before it seeks to shed customers who aren't repairing their storm-damaged property. Allstate has not said whether it will comply. But doing so is the only way for the company to heal this black eye.
The state allowed insurers to begin canceling policies this month for abandoned or unrepaired properties. Allstate says drive-by inspections last year revealed that all the homes it targeted for cancellation fit that criterion.
But the process the firm is calling an "inspection" was obviously inadequate. The company said that up to 12 teams of two employees each worked for a week to inspect 40,500 pieces of property in five parishes. Even allowing for a 12-hour workday, the teams would have spent an average of 90 seconds per home. The only documentation provided was a list of addresses with the word "vacant" circled next to those deemed abandoned.
It's no wonder then that many homeowners got cancellation notices that they did not deserve. A total of 486 complained to the state insurance department. Investigators who checked a sample of them concluded that it was obvious all the homes were inhabited or being repaired.
Allstate's process, Mr. Donelon said, was "an ill-conceived and sloppy inspection program" at best. "At worst, they wanted off those properties."
The firm says it complied with state rules. Unfortunately, it's hard to trust Allstate now, and for that the company has only itself to blame. The company also announced last year that it would cancel wind and hail coverage for 30,000 customers in South Louisiana, giving up the mass effort only when Mr. Donelon threatened to sue.
Louisiana needs insurance providers to continue its recovery, and Allstate can be an important player in our future. This is why Mr. Donelon, who is considering possible sanctions against the firm, is appropriately waiting to see how the company responds to his order.
But Allstate also must play fair. Customers who have paid their premiums and followed the rules deserve better than a company that is either sloppy or heartless.