Investigation Finds Allstate Katrina Claim Delays Justified: Contrast Louisiana’s Insurance Climate With Mississippi’s

Here is a story by Michael Kunzelman of the Associated Press about an investigation by the Louisiana Department of Insurance into Allstate’s claims adjusting practices.  The investigation stemmed from hundreds of complaints, and Allstate apparently led the pack among insurers although State Farm is a bigger presence in the state.  Officials, to the surprise of the insurance commissioner, found Allstate performed as it should have.  The commissioner is also ordering a review of the claims handling of St. Paul Travelers.  For a perspective of the people who complained, here is a story from Rebecca Mowbray of the New Orleans Times-Picayune about some of the folks upset by Allstate’s cancellation of their homeowner policies.

Now, one question that arises out of this: an investigation into State Farm is not mentioned in this story, and I’m inferring that there hasn’t been one.  State Farm is Louisiana’s biggest insurer, and presuming State Farm’s claims handling protocols were much the same if not exactly the same in Louisiana and Mississippi, why are we not hearing the loud chorus in Louisiana about State Farm’s conduct that we hear from Mississippi?  I think the real, unwritten story behind all of these Katrina cases is the answer to that question. 

5 Comments

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5 Responses to Investigation Finds Allstate Katrina Claim Delays Justified: Contrast Louisiana’s Insurance Climate With Mississippi’s

  1. Marjory

    If Allstate cancels your home insurance, do you think it is hoping to maintain your auto insurance or other insurance? Neither of these articles answer that question. And how hard is it to get home insurance from another company? It is a hassle but is it really hard to find another company to insure you in Louisiana?

  2. I don’t know for sure, but I imagine an insurer who sells you both auto and home policies would like to keep you for auto if they drop your homeowners policy, but in a larger sense, I suppose an insurer really doesn’t care all that much: auto is less profitable than homeowners insurance. Overall, across the nation, claims on homeowner policies are rare, while car claims are not rare. So an insurer who doesn’t want the risk of your homeowners policy is probably OK with the loss of your auto policy too, if you get mad and go elsewhere. It’s worth it for them to get rid of the risk of your homeowners policy. For some places, it is pretty hard to get insurance coverage from another company, which is why Citizens, the state-run insurer of last resort in Louisiana, has tens of thousands of customers.

  3. Allstate insured during Katrina

    I have lived in Louisiana and Mississippi extensively before, during, and after Katrina. The difference is Mississippi has consumer advocacy leadership and Louisiana does not. Even the media coverage reflects the leadership of each state. Allstate ordered 3 engineers reports on my nonflooded home in Louisiana.

  4. Layne

    Re: above comment that Homeowner’s insurance is more profitable than car insurance.
    I don’t think this is correct. Your reasoning that car claims are more frequent is correct. But, interesingly, car claims are much easier to predict, and are not as prone to these huge catastrophic losses. This is partly due to the law of large numbers (there are more auto policies than homeowner’s), partly due to lower severity of car claims (much lower average $$/claim), and also due to the fact that most auto claims are settled on an actual cash value basis, and not a replacement cost basis as are Homeowner’s policies. Auto policies are also not as prone to “maintenance” type claims as Homeowners policies are. Example: Plumbing gets old in house, or something is not maintained well and breaks. The resulting damage is covered under a Homeowner’s policy. In an auto policy if you don’t maintain your engine and it breaks, coverage is excluded.
    Insurers definitely want the auto policies. The only reason many insurers write homeowner’s policies is in order to get the cars. Homeowner’s is really only an “accomodation” in many areas.
    It is much easier to price, and consequently make money on auto policies. An easy way to see this, is that there are countless companies that offer Automobile insurance only (progressive, geico, and hundreds of smaller companies), some that offer both (State Farm, Allstate, Farmers, Farm Bureau, etc), but how many can you name that offer Homeowner’s only? I can’t think of any.

  5. Layne, these are good points, all may be correct. I was basing my statement on accounts I read from industry people in the debate over Florida’s new insurance package about the relative profit in auto and home policies. However, I could be wrong, wouldn’t be the first time.