Allstate Accused Of Leaving Homeowners Dry

Calif. Homeowners Say They Were Misled Into Being Underinsured - And Weren't In "Good Hands"

(CBS)  When wildfires swept through Jack and Patricia Bennett’s Rancho Bernardo home last October, everything they owned was reduced to ash.

"So many treasures that are gone," Patricia said.

But since they were insured with the "good hands" of Allstate, they thought they’d be able to rebuild quickly, CBS News correspondent Sandra Hughes reports.

"When the demolition crew told us and said, 'you are underinsured,' I said how can we be? We called a year ago to make sure this would not ever happen to us," she said.

Although Allstate has paid the policy limits, the Bennetts say they are still going to be $150,000 short in re-buiding their lives.

And they are not alone. To rebuild their home, Mark Emery and Jeanette Stratton will have to dig deep.

“We really didn't want to have to dig into our savings just to rebuild the way it was before,” Emery said.

They contacted their agent to make sure their policy would reflect recent upgrades.

"I called them and told them about the recent changes to make sure that we had the best policy that they had," Emery said.

But their "deluxe plus homeowners policy" has so far only been worth a check for $234,000 - and local contractors say they need at least $500,000 to rebuild.

Allstate may pay them up to an additional 50 percent "extended replacement cost," which would add up to another $117,000. But they are still $150,000 short.

"We were grossly underinsured, as apparently everybody has been," Emery said.

Consumer advocates claim there is a reason insurance companies want to keep your policy limits and premiums low.

"If they tell you what it really will cost to insure you home you're gonna say, well I'll get back to you. What they'd rather do is low ball. And the person says okay because they trust their agent," said Amy Bach of Policy Holders United.

Fire victims are realizing they are not unique. Time and again, Allstate is accused of leaving customers uninsured and unable to rebuild after disasters.

Allstate has been sued in California, Florida and Texas by policy holders claiming the company uses an unfair business model.

After Hurricane Katrina, Allstate was fined for dropping policy holders illegally. The California Department of Insurance fined Allstate after the Oakland fires of 1991.

"And why did they get fined?" Bach said. "Because so many people were underinsured with Allstate."

Between 1987 and 1996, Allstate paid consumers 73 cents for every dollar on the premium. That dropped to 59 cents between 1997 and 2006, a 19 percent in the value of Allstate's product to consumers. In 2006, the company hit a record profit of $4.9 billion.

Allstate's Bob Daniels says its customers are more valued than profit.

"We work with the customer all the way through the process to make sure we are doing everything we can so that they get the full value of their policy," he said.

According to Daniels, of the 200 homes covered by Allstate that were destroyed in last year's wildfires, every homeowner has been paid something - often up to the policy limits.

"Well the fact that we were able to give them their checks within two to four weeks, we are very proud of," he said.

But the homeowners CBS News talked to say the policy limits aren't enough.

"I'm just getting my second wind," said Jeanette Stratton.

Good thing - this could be a battle that rages well into the next fire season.

[a010102]

Insurance companies are for RISK MANAGEMENT. You pay them for accepting your risks. Some of you are trying to come out better than you were in the beginnig.

You are paid for damages depending on how much coverage you had- You are stupid to expect a company to pay more than they are entitled to pay. THIS APPLIES TO ALL INSURANCE COMPANIES!!! NOT JUST ALLSTATE.

A last word to those who say insurance companies should be non-profit: Would you work for no pay? It takes people fill the many roles in the insurance business. These are MORAL, HARD WORKING PEOPLE WHO CARE ABOUT THEIR CUSTOMERS. They deserve some compensation for their work.

Allstate is a great company, my agent could not be any more helpful and I have always been covered and kept IN GOOD HANDS.

[a010102]

For those of you out there griping, whining, and putting down Allstate:

For one, there is no such thing as full value replacement coverage. YOU know the value of YOUR HOME and YOU are responsible for making sure that YOU have it covered for the right amount. If you are going to have a half million dollar house, look at the policy declarations you get every year from your insurance carrier and make sure the dwelling coverage is adequate. Some people lower their coverage in order to lower their premiums- if you can''t afford to insure a $500K house, don''t build one. If you do anyway, IT IS YOUR FAULT for not paying for adequate coverage. Stop pointing fingers and blaming others! Be an adult- accept the fact that its your fault you weren''t covered for enough, and rebuild on a smaller scale. ANY insurance AGENT with ANY COMPANY, Allstate included, is more than happy to raise your coverage limits to any amount you see fit. Now when your insurance company covers your house for more, they are taking on more of your risk. Therefore, you will have to compensate them for that.

[ksrobillard]

I am very sorry for those folks who lost everything in the California fire. But I''m sure they were given the option to buy "full value replacement" insurance. If they would have purchased that type of policy, they would be very happy right now. Perhaps their contractors were or were not over estimating the costs of replacement. In other words,the insurance agent probably did offered that type of policy to the customer. I can''t help but think these people where too cheap to buy a ''full value replacement'' policy and are just whining about their losses. They are just trying to make the insurance agent look bad, so someone will come to their rescue, when really it''s their own fault for not putting out for the more costly insurance that would have covered all the losses.

[bacaboy101]

Agents that sell insurance are generally rewarded based on the amount of premium for each policy sold. I have a hard time believing there is an agent out there that would want to make less money by underinsuring their clients? What generally happens is that a client comes into an agent''s office and is given several options of coverage with different provisions and prices. Consumers will generally take the lowest cost option, fully knowing that they are getting a lower amount of coverage. After all, most people hope to never need it. Then catastrophy hits and they have amnesia and want to blame the company for underinsuring them when it was their choice from the beginning? I work in the insurance industry and see this every day.

What CBS always does is give a one sided look at things... what about the thousands of policy holders that were more than satsfied? What about the other insurance carriers? I guess Allstate doesn''t give CBS enough advertising dollars or they would have never run a piece like this.

[keithle1]

How many people read the fine print of these insurance policies? Go through it with a fine tooth comb. They trust. They assume. They have faith. They don''t think about it until the s*it hits the fan.

AllState is a business. They''re trying to make as much money as possible like all of them. Duh. They''re not out to do anyone any favors. The "Good Hands" b.s. is just advertising. Like Ford saying, "Quality is job 1."

California goes through the "wildfire" drill year after year after year. I remember seeing them when we lived out there & that was 30 years ago.

[hoosier5283]

The most ridiculous part of this story was the claim by the chick from United PolicyHolders who said Allstate wants to underinsure you so that you''ll buy their policies. That''s grand. Yeah, they want to collect less money on each and every one of their policies so that they can take on risks that are greater than they insured for. Are you kidding me???

The fact is that most homeowners insurance claims are not anywhere near the limits of the policy. It would be suicide for Allstate to not collect the premiums that they thought were commensurate with the risk involved.

[mswolfestock]

Allstate is to insurance as McDonald''s is to food.

[dedad1]

Hey Mel, bad press sells. When was the last positive piece of reporting splayed across the front pages or net. Papparazzi of print. Thats all CBS is.

[melfromsc]

Why is Allstate on attack here? I don''t hear attack on State Farm who is notorious for dropping homeowners with the blink of an eye. I don''t hear Nationwide being bad mouthed. You should go talk to some of their insureds and see what they have to say. Once again CBS did not air the positive comments made, just the negative trying to make a good company look bad. Why not publish the comments from those insureds who were completely satisfied when Allstate handled their claims from the wildfires in 2007? While it is up to your agent to make sure you are covered fully it is also up to the policy holder to know what you have and to keep up with it. Like the comment up above, know what you are signing and paying for. My motto is it is better to pay for more than not enough. Allstate is a great company who prides themselves in settling claims quickly. If you are gonna interview someone, publish the WHOLE story and not what you want heard.

[slubobo]

Nice hit piece! United Policyholders is supported by trial lawyers and they love this free biased publicity.

There were other Allstate policyholders interviewd that were very satisfied with the claim service they received from Allstate--didn''t see them did you?

CBS Evening News--the network news nobody watches anymore. Biased sensationalism is designed to grab more viewers.

If you are an adult who owns a house...get yourself the coverage you think you need when talking to your insurer. You''re the one in control of that. Blame yourself if you''re underinsured

[kindred33-2009]

I work in the insurance industry, and there is one thing everyone should keep in mind. Always read what you are signing. Allstate is not the only company that has limitations on what they cover. If you do not understand the policy, find a company with an agent that will explain the coverages to you in detail. i.e. what is and is not a covered peril. Don''t be afraid to ask every question you can think of. In short Make sure your dwelling amount is enough to replace your home. If it''s not raise it or find a different company that will insure it for the value you deserve.

[dedad1]

I switched to GIECO. Saved money, got in an accident, lost money...but I still love the gecco.

[talkingham]

You know that - you''re in good hands with Allstate lie?-- They should have the logo with an Allstate rep''s hands choking the customer by the neck!

[jackp32]

I think the insurance cos are doing great. My insurance company stock portfolio is performing quite well. Keep up the good work guys.

[caldwellptr]

My Allstate Auto Policy just jumped $45.00 a month. That is $540.00 over what I payed for insurance last year. That is almost half a tank of gas a month (at the current $4.10 a gallon). While insurance is a state requirement, as every driver should have insurance, the risk from leaving my vehicle in the driveway due to high gas prices certainly wasn''t a consideration in the hike in my policy.

[nlm2383]

AllState screwed an elderly couple by my in-laws house when their house burned down. They made sure they put AllState on blast with a huge sign in front of their demolished house letting everyone know that AllState took them for their money... I wouldn''t trust them with a dime of my money.

[babooph]

Propagandists & politicos are ALL LOBBIED-this means Allstate has paid off who really counts,for a lot less than their policy holders will ever see.

[darnedsocks]

NOT ALL INSURANCE COMPANIES ARE CROOKS LIKE ALLSTATE! MOST OTHER CARRIERS PAY IN FULL!

[docpeter-2009]

If you want to be informed and understand the extent of the insurance rip-off go to:

http://www.justice.org/docs/TenWorstInsuranceCompanies.pdf

While the article deals mostly with auto accidents or health care, you need to consider the companies as a whole.

They will not act one way for one type of policy (auto insurance) and totally different for another type of policy (homeowner). They will cut, slash, burn across the board.

This is a good reason to regulate insurance, big pharma, banking, the pets of the GWB administration and the GOP. These 3 industries are big contributors to lobbiests and PACs.

Get them out of DC NOW!!!

[darnedsocks]

I HATE ALLSTATE WITH A PASSION!