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Allstate pulling out of Earthquake Market Nationwide

June 5, 2006 by Jonathan Stein

This really should not come as a surprise to anyone. Back on March 27, I wrote about Allstate pulling out of the earthquake market in Ohio. (You remember the quote from their spokeswoman, right? If not, here it is:  “The current insurance model is not well-suited for handling losses from low-frequency, high-severity, mega-catastrophic events.”)

Now, Allstate has decided to pull out of the earthquake coverage market nationwide. They claim they cannot make money by insuring these losses.

I still don’t get it, and I know a thing or two about insurance. If they cannot make money by collecting premium and paying out on a claim every 10 or 12 or 15 years, then how can they make money? They are supposed to collect premiums, and when a claim is paid, pay it out. At the end of the day, they should be making money. If they are not, they need to re-evaluate their business model, not pull out of a market completely. But, that is just one man’s opinion.

Categories: Current Affairs, Homeowners Insurance, Insurance Operations

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