Insurers give nonbundlers heave-ho

— Some insurers in Arkansas are dropping customers who refuse to bundle their auto insurance with their homeowners’ policy, said Jay Bradford, commissioner of the Arkansas Insurance Department.

There is nothing illegal about the practice, Bradford said, and bundling policies normally saves customers money.

But actually dropping customers who don’t want to combine their auto and home insurance with one carrier is a relatively new practice.

The Insurance Department has seen more instances of required bundling, Bradford said.

“In the old days, it wasn’t a factor,” Bradford said. “Policies could stand on their own.”

Most insurers in Arkansas fail to make a profit on homeowners’ insurance, Bradford said.

“Because of our weather-related losses in the state, the homeowners [policies] are a loss-leader,” Bradford said in answers to questions about the practice. “The big difference is the wind, hail, tornado exposure, etc. So auto policies are more profitable. And insurance companies are trying to combine the two to make the bottom line work.”

Bundling two policies with the same insurer can result in significant savings for the customer, possibility as much as 25 percent, Bradford said.

Insurance companies have the right to drop a customer if they notify the customer prior to30 days before the policy’s renewal date, Bradford said.

It is not considered to be a policy cancellation, so there is no stigma for the customer if the policy is dropped, Bradford said. It simply is considered a nonrenewal of the policy, he said.

A reason some customers do not want to combine policies is because they have a good relationship with both insurance agents and don’t feel good about dropping either one, Bradford said.

Very few companies are actually dropping customers, he said.

State Farm Insurance, the largest property and casualty insurer in Arkansas, does not require customers to combine policies, said Gary Stephenson, a State Farm spokesman in North Little Rock.

State Farm does inform its customers of a discount if they combine at least two different policies, Stephenson said.

The insurer uses a low-key approach in trying to land the extra business, he said.

State Farm typically will include an insert in a customer’s bill indicating the customer can receive a discount on their homeowners or auto policies if they add the second one, Stephenson said.

“And we’ll let them know they can contact us if they are interested,” he said.

Farm Bureau Mutual Insurance Co. of Arkansas sent a letter to a central Arkansas customer Nov. 10 indicating that her homeowners policy would be dropped on the expiration date because she had “no other supporting business.”

Gregg Patterson, a Farm Bureau spokesman, said Wednesday that the company doesn’t “publicly discuss our business operational strategies.”

Business, Pages 25 on 12/20/2012

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