Gary Puffpaff was irritated when he got a letter from Allstate Insurance telling him his homeowners' policy wouldn't be renewed because he had his auto insurance with another company.
Not only did Puffpaff question whether the insurer's action was legal - which, it turns out, it is - but he also was upset because Allstate canceled his auto policies a half-dozen years ago after he filed three large claims.
"Every time I see their commercial I laugh about what they say, because I don't believe a word ... about (how) they take care of you and all that," said Puffpaff, 61, a repair technician who lives in Charlotte. "They only want your money."
This year, two of the most popular underwriters of homeowners insurance policies in North Carolina - Allstate and N.C. Farm Bureau - have adopted underwriting guidelines that link homeowners policies with auto policies across the state.
Both companies cite economics as the reason for their stance.
In the case of Allstate, if you don't have an auto insurance policy from us, they're telling customers, your homeowners policy won't be renewed.
The Farm Bureau's guidelines are slightly different, winnowing out those who don't have a Farm Bureau auto policy and who also have filed a claim on their homeowners policies within the past five years.
Similarly, new Farm Bureau customers who want to buy a homeowners policy also will have to buy auto insurance.
Like many insurers, it also offers a discount for bundled policies.
The Farm Bureau also will "reconsider" renewing a homeowners policy if a customer wants to purchase an auto policy after being notified of the company's new guidelines, said Steve Carroll, executive vice president and general manager at Raleigh-based Farm Bureau.
That's not an option with Allstate, said spokesman Tracy Owens.
Allstate's underwriting guidelines, which took effect at the beginning of the year, affect 46,000 homeowners policyholders; Farm Bureau's guidelines, which take effect Jan. 1, will affect 28,000 homeowners policyholders, according to the companies. Policyholders are being notified about the new guidelines 60 to 90 days in advance of their policy renewal date.
Farm Bureau ranks third, with a 13.9 percent share, in the state's homeowners insurance market, and Allstate ranks fourth with an 8.7 percent share, according to the state Insurance Department.
A legal practice
The department searched its database of consumer complaints at The News & Observer's request and found it received 33 complaints about the policy linkage this year.
"The public should be protected from these kinds of strong-arm techniques," wrote Samuel Crowell Jr. of Lexington.
"Can they do this just because we don't have our car insurance with them?" wrote Victoria Shafer of Mooresville. "How is this fair?"
Fairness is a judgment call, but linking policies is considered legal in North Carolina.
Bob Mack, deputy commissioner of the Insurance Department's property and casualty division, said state law doesn't regulate underwriting guidelines - which spell out under what circumstances an insurer will sell you a policy - "provided it's not discriminatory."
Insurers have adopted similar underwriting guidelines in North Carolina in the past.
"It goes in cycles," Mack said.
Insurers have adopted such guidelines in other states, but not always successfully.
In 2007, Allstate discontinued its practice of linking homeowners policies with auto policies or life insurance policies after New York regulators directed it to do so, according to the trade publication Insurance Journal.
State regulators contended the practice violated anti-rebating and anti-discrimination sections of New York insurance law; Allstate complied with the directive even though it contended it had the legal right to link the policies.
The policy linkage required by Farm Bureau and Allstate in North Carolina is one-way only.
Both companies are willing to provide your auto insurance even if you don't have a homeowners policy with them.
That makes sense because auto insurance is viewed by the industry as an attractive business and homeowners insurance isn't, Mack said.
"It's a business decision that we're doing this," said the Farm Bureau's Carroll.
"No insurance company likes to discontinue coverage."
'Lucky to break even'
When it comes to homeowners insurance, "even in a good year ... we're lucky to break even," Carroll said. This year, he said, hasn't been a good year, with Hurricane Irene, the deadly tornadoes that tore through the state and a flurry of other storms.
"Weather patterns just seem to be more violent than they were 20 years ago," he said.
Raising insurance premiums isn't an option now. The state regulates homeowners insurance and imposes a cap on premiums.
Allstate spokesman John Heid said of the company's underwriting guidelines: "Obviously, the decision was carefully considered. It's the right decision that will help us remain financially strong for the customers and the communities we serve."
Of the top five homeowners insurance companies in the state, only Farm Bureau and Allstate have such guidelines.
The other three - State Farm, Nationwide and USAA, which caters to current and former members of the military and their families - say they don't link homeowners and auto policies and have no plans to do so.
"Every customer's needs are unique and individual, and we really believe that they ought to have an opportunity to choose how to tailor their insurance products to best meet their needs," said State Farm spokeswoman Kim Conyers.
It's unclear whether some smaller insurers have adopted similar underwriting guidelines for their North Carolina customers. It's something the state Insurance Department doesn't track.
Puffpaff, the former Allstate customer whose homeowners policy wasn't renewed, ended up paying nearly $300 more in annual premiums when he went with another insurer - and his coverage isn't as good now because it doesn't cover the house's contents.
"I bought my house in '93 and I have been with (Allstate) the whole time and have been a loyal customer," he said.
"I know now that loyalty on my part doesn't mean a thing."