Allstate Corp. officials might be called to Annapolis to answer questions from state lawmakers worried about the insurance company's decision last month to stop writing new homeowner policies in Maryland's coastal areas.
"My concern is that when we have an industry leader make such a huge policy change, others in the industry tend to follow," said Del. Dereck E. Davis, chairman of the House Economic Matters Committee, "and I would like to address the issue now before it becomes a crisis situation. This set off alarm bells for folks who live across that region."
Allstate, one of the largest insurers in the state, will no longer offer new property insurance in all or parts of 11 counties, mostly along the Chesapeake Bay and its tributaries. The company, socked by enormous costs from damaging hurricanes including Katrina, has been working to minimize its future risk by letting homeowner policies lapse in other states and by refusing to write new ones. Existing customers in Maryland won't be affected.
The insurance industry has been under fire from consumer groups for refusing to do business in coastal regions. The Consumer Federation of America released a report this week accusing the industry of overcharging for homeowner and auto insurance, while racking up increased profits and paying out less on claims.
Insurance companies defend their practices, saying that they need to make business decisions to remain financially healthy so they can pay the claims of current customers. Allstate, which was still able to post a $1.8 billion profit in 2005 despite Katrina, cited as part of its rationale for limiting new policies the warnings by scientists that a warmer Atlantic Ocean will lead to more severe hurricanes hitting the Northeast.
Allstate spokeswoman Debbie Pickford said company officials would be "happy to work with the State House" in Maryland. "Obviously, we have our business imperatives," she said, "but I think all parties working for a solution to coastal issues is a great thing."
Allstate's decision followed a move by Nationwide Mutual Insurance Co. two years ago to cap new business in coastal areas in Maryland and to not write new business in two ZIP codes near Ocean City.
Davis, a Prince George's County Democrat, said he wants to start a dialogue with Allstate and other insurance companies, and doesn't envision legislation until next year, if at all. He said lawmakers may approve a legislative task force to explore the matter before then.
In the Senate, the American Insurance Association is slated to give a briefing next week to the Finance Committee on the basics of property and casualty insurance. But the committee's chairman, Sen. Thomas M. Middleton of Charles County, said the loss of insurers on the coast is "not on my radar screen."
Some industry experts and regulators say Marylanders still have plenty of choices for private insurers. And for those who are unable to get coverage, the Joint Insurance Association, the state's insurer of last resort, can provide it.
laura.smitherman@baltsun.com