In a 1950’s TV commercial, the announcer says, “I’ve been telling you about how Allstate keeps rates low without cutting corners on service.” He then introduces us to the Taylors, an elderly New York couple who have been Allstate customers since 1939. We learn that the Taylors have filed nine claims in the past eight years, including one involving a car accident in which they were seriously injured. Mr. Taylor praises Allstate and tells us, “We appreciate the prompt settlement.” The commercial ends with the iconic slogan, “You’re in Good Hands with Allstate.”
The accompanying image is of a giant pair of cupped hands holding a tiny house and car, reassuring us that we would be taken care of in the event of any calamity. But sometimes giants can get surly and turn on the little people, and that’s what happened last week.
Allstate announced that it was dropping home owner coverage for 46,000 North Carolina customers simply because they had opted not to purchase their auto insurance through the “good hands people.” With the AIG scandal still fresh in our minds, and with millions of people unemployed and their homes underwater, this wasn’t exactly the best time for Allstate to cancel policies. Of course, Allstate was prepared with their own spin on the announcement. Company spokesperson Tracy Owens told McClatchey-Tribune news that they made the cuts in order to avoid bankruptcy, which would have put 400,000 other North Carolina customers in jeopardy.
But that doesn’t exactly square with the company’s mission statement. Check out Allstate’s website and you’ll find an open letter from Vice President of Public Social Responsibility Victoria Dinges, who writes, “At Allstate we stand for making things right. For keeping our promise... to our customers.” Oops!
The fact is Allstate can’t make as much profit as they’d like if large numbers of customers don’t bundle, so once again we have a large, greedy corporation sticking it to the people. But Allstate isn’t the only offender. Last week, the North Carolina Farm Bureau Mutual Insurance company sent Dear John letters to 28,000 policy holders who had declined to bundle.
The good news is that customers who got screwed by Allstate can switch to State Farm, Nationwide or USAA, none of which require bundling of home and auto policies, though USA is open only to members of the military and their families. Still, a promise is a promise, and Allstate broke theirs to 46,000 of our neighbors. I recall from my childhood Sunday school lessons that a promise is the same as a contract, so that puts Allstate in breach of their contract with customers whose only crime was not bundling — which, by the way, was not required when these same customers purchased their homeowner policies.
All this begs the question: What is the North Carolina Department of Insurance doing about these cancellations? The answer is: Nothing. NCDI spokesperson Marni Schribman told the Fayetteville Observer that her agency has no authority over insurers who drop customers. Moreover, insurers who do business in our state are under no obligation to notify NCDI when new rules are put in place. This is the same agency who refuses to push for caps on healthinsurance premiums. So why have a Department of Insurance if they cannot effectively regulate the insurance industry? I hate to say this, but the only way to solve this problem is to have state lawmakers get involved. They must amend and broaden the powers of NCDI, mandating that agency to reform and regulate insurance companies. And they must demand swift enforcement of regulations which might result from those reforms.
Certainly it’s okay for an insurance company to cancel a policy if the customer has lied in order to obtain coverage, or if he or she engages in behavior that puts themselves, their families or their property at risk. But no one should be dropped from any kind of coverage simply because their underwriter wants to increase profits. If NCDI and members of the North Carolina General Assembly fail to effect true reform, then we might as well abolish the former and fire the latter. If we do both at the same time, that’s called bundling.
Jim Longworth is the host of “Triad Today,” airing on Saturdays at 7:30 a.m. on ABC45 (cable channel 7) and Sundays at 11am on WMYV (cable channel 15)