Allstate to Halt Homeowners Insurance

Allstate's decision to stop writing new policies in the state because of the threat of costly natural disasters is drawing wide-ranging reactions.
Insurance Commissioner Steve Poizner said the move by the Northbrook, Ill.-based insurer was "a shortsighted business decision" and asked Allstate to prove that it will not overcharge its existing California consumers.
And the Foundation for Taxpayer and Consumer Rights, a leading state consumer group, actually hailed the decision, saying Allstate overcharges homeowners with fees and excessively high rates.
California's third-largest homeowners' insurance company announced the decision on Thursday and also said it will seek a 12.2 percent rate increase for its 900,000 policyholders in California. Allstate must receive approval for the increase from the Department of Insurance.
The taxpayer foundation called the decision a ruse intended to put pressure on the insurance department to approve its rate increase.
"Allstate can't bully California into accepting outrageously high rates by threatening to take their coverage and go home," said Carmen Balber of the foundation, in a statement. "If Allstate follows through on its playground threat, California consumers should fight back by leaving the company and moving all of their insurance business elsewhere."

However, the company said it could not longer take the risk of writing new insurance in a state prone to wildfire and earthquakes. Allstate has stopped issuing new policies in more than a dozen states along the Gulf Coast and Eastern Seaboard.

Other insurers are expected to fill the void left by Allstate in the marketplace.