Allstate agrees to pay fine, cut property premiums and add policies
Article Courtesy of The Sun Sentinel
Published August 16, 2008
one of Florida's largest property insurers, agreed to an unprecedented
settlement with the state Friday.
The agreement requires the company to pay a $5 million fine, reduce
homeowner insurance premiums statewide by 5.6 percent within 30 days, add
100,000 new homeowner policies within three years and forgive a $175
million loan to its Florida subsidiaries.
"It is unfortunate that Allstate's disregard of Florida law required
[us] to take the drastic actions that we did," Insurance Commissioner
Kevin McCarty told reporters in a conference call. "However, the
terms agreed to by Allstate ... go a long way toward restoring confidence
in Allstate's business practices and will provide a great benefit to their
policyholders and future policyholders."
The agreement is considered a big victory for McCarty, whose office has
gotten more aggressive as a consumer watchdog after the 2004 and 2005
hurricanes when insurers dropped hundreds of thousands of policies and
doubled or tripled rates in some cases.
Allstate, the state's third-largest automobile insurer and No. 4 property
insurer, proposed boosting homeowners' coverage prices by a statewide
average of 43 percent in 2007 after lowering them by about 14 percent
earlier last year.
Early this year, McCarty launched an investigation of Allstate's pricing
practices. Allstate withdrew its proposed rate increase but didn't provide
all the documents demanded by the state. That's why McCarty's office
briefly suspended 10 Allstate companies from selling property and auto
And his office filed an administrative complaint alleging the companies
failed to fully open their books, falsely marked documents that were
publicly available as "trade secrets" and falsely certified that
a company executive had reviewed the rate filing when he admitted in a
state hearing that he hadn't read it.
"Commissioner McCarty has once again done an outstanding job fighting
for and protecting the consumers of Florida," Gov. Charlie Crist said
in a statement Friday in reaction to the settlement.
The Office of Insurance Regulation's complaint against Allstate will be
dropped as part of the agreement.
Under the deal, Allstate Floridian Insurance Co. and Allstate Floridian
Indemnity Co., will reduce their base rates by 5.6 percent uniformly
throughout the state within 30 days and not ask the state to raise rates
again for at least one year.
The insurer, which has dropped about 250,000 policies in Florida the past
few years, will add 50,000 new homeowner policies and 50,000 new renters'
and condominium unit owners' policies within three years spread across
every county of the state.
"The resolution of this matter demonstrates our desire to work with
the Office of Insurance Regulation and to put issues in dispute behind us.
It also allows us to work with the state to find long-term solutions to
address serious issues with Florida's insurance system," Allstate
Floridian spokeswoman Kathy Thomas said.
Allstate will be able to trim rates and add policies because backup
coverage is cheaper thanks to two hurricane-free years and more
state-backed backup coverage, Thomas said.
Bob Hartwig of the Insurance Information Institute said Allstate's move is
one indication Florida's property insurance crisis is stabilizing after
two years with no major storms.
But Hartwig said there's no guarantee insurers will cut prices this year,
even if there's no hurricane.
"Florida is an inherently volatile market, so the tone of it can
literally change in a matter of days," he said.