It's one thing to save money on insurance by buying many of your insurance plans from one company. But what if you are forced to buy an auto policy from your home insurer to retain your homeowner coverage?
The practice is called "forced bundling," and Allstate thinks it's a reasonable way to do business. On the other hand, some consumers and legislators disagree. In Maryland, the state's General Assembly recently debated a bill banning such bundling.
Maryland delegates Tom Hucker (D-Montgomery County) and Mary Ann Love (D-Anne Arundel County) presented legislation in late March that would have prevented an insurer from denying or canceling a homeowner or renter policy simply because the customer didn't want to purchase car coverage from the same insurer.
Peter Killough, a consumer advocate in the Maryland Attorney General's Office, does not support forced bundling. "We talk about the free market and people having free choice to make decisions about their lives, including which insurance they want and who they want to provide it," he says. "Forced bundling removes that. That's just not good for the consumer. It isn't right to have another policy, like an auto policy, forced on a homeowner just so they can have their home insured."
The bill (HB 1105) was unanimously approved by the state House March 19. But support for the bill waned April 4 when it received an "unfavorable report," by a 7-2 vote, in the state Senate Finance Committee. That means the bill is unlikely to be voted on by the full state Senate as written.
Late last year, Allstate told approximately 45,000 North Carolina homeowners insurance customers that it wouldn't renew their policies unless they also purchased Allstate auto insurance. (See "Allstate's new script: The bundle ultimatum.") North Carolina Farm Bureau Mutual Insurance was going to do the same with about 28,000 policyholders, according to a Baltimore Sun report.
Steven Weisbart, senior vice president and chief economist for the Insurance Information Institute (III), said in the Baltimore Sun report that consumers aren't actually "forced" to bundle because they can switch to another insurer at any time. He noted that the market is very competitive, which is a plus for any policy-seeker.
Weisbart added that mandatory bundling can be a useful marketing strategy because it helps insurers build lasting relationships with clients who are looking for savings. Most insurance firms do offer discounts, usually in the 10 percent to 15 percent range, to consumers who have multiple policies with them, he said.
Pete Moraga, a spokesperson for the Insurance Information Network of California (IINC), agrees. "Bundling has traditionally been a marketing tool (to reward) good customers," he says, adding that insurers prefer bundling as a way to offset losses they often incur when writing home insurance policies.
"Because the homeowners insurance line has been a relative money-loser for many insurers, bundling allows them to share other insurance business from customers with higher combined ratios, such as auto," Moraga says. "Auto insurance has been one of the most profitable lines for insurers."
But what if your insurer demands forced bundling and you don't want to play along? Moraga and the IINC suggest taking steps to ensure you and your property are protected at the best cost:
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