Florida orders Allstate to turn over records on
Article Courtesy of The Sun Sentinel
Bushouse and Tonya Alanez
Published October 17, 2007
state's investigation of a possible conspiracy among property insurers to
keep prices high expanded Tuesday with the governor and insurance
commissioner ordering Allstate Insurance Co. to turn over documents
regarding its business practices and relationships with trade groups.
They served a subpoena on Allstate and its subsidiary Allstate Floridian
Insurance Co., Florida's fourth-largest insurance company, just three
weeks after Allstate Floridian proposed raising its homeowner insurance
rates by astatewideaverage of 41.9 percent.
|The state wants to make
sure Allstate and other insurers are passing along to
customers the savings state lawmakers expected by allowing
insurance companies to buy cheaper backup coverage from the
Florida Hurricane Catastrophe Fund, Insurance Commissioner
Kevin McCarty said during a news conference Tuesday at the
Capitol in Tallahassee.
"We will continue to be vigilant to ensure that these
savings are passed onto the policyholders and to the people
of Florida," he said.
Insurance industry officials likened the action against
Allstate to a political witch hunt.
This round of subpoenas follows State Farm Florida Insurance
Co.'s decision earlier this month to bow to state pressure
and give additional rate cuts to customers
Charlie Crist, right, and Insurance Commissioner Kevin McCarty,
conduct a news conference in Tallahassee to talk about property
9 percent instead of the proposed 7 percent the company originally
requested. State Farm also agreed to change the way it planned to drop
50,000 customers' homeowner policies statewide.
State Farm Florida, the state's largest private insurer, decided to settle
with the Office of Insurance Regulation rather than testify at two days of
public hearings in Tallahassee. The insurance department subpoenaed the
company in August.
State officials set hearings for Jan. 15 and 16 in Tallahassee to deal
with Allstate. Company officials will have to answer questions and provide
documents detailing their companies' agreements to purchase reinsurance,
the companies' relationships with storm risk-modeling firms,
insurance-rating organizations and insurance trade groups.
McCarty said he was particularly interested in getting more information
about Allstate's relationships with the trade groups. He expects the
company will turn over the documents sometime next month.
"There's no question that a close evaluation of what is going on
within the trade associations are going to be very telling," McCarty
said. "We are going to vet that very carefully."
Allstate spokesman Adam Shores said the company is "extremely
confident in our business model here in the state." The company's
attorneys are reviewing the subpoenas, he said.
Industry officials said the move only sours the working relationship
between state officials and property insurers.
"It seems to be increasingly transparent that [the subpoenas are] a
punitive action," said Robert Hartwig, president and chief economist
of the Insurance Information Institute, a nonprofit trade group.
"It's a form of intimidation. ... There's absolutely no justification
that would support the Office of Insurance Regulation's bizarre theory
that insurers are colluding indirectly or directly through their trade
association or modeling companies or rating organizations."
More subpoenas will cause further erosion of insurers' shaky faith in
Florida's insurance market, and shift more policies into state-backed
Citizens Property Insurance Corp., Hartwig said. Companies will keep
scaling back in Florida if they don't think they can charge the price they
need for their product, he said.
"I think it's another negative on the marketplace," Hartwig
said. "In the long run, the state is going to be the loser in all of
this. I think that insurers perceive the regulatory environment to be
Crist, who appeared with McCarty at Tuesday's news conference, continued
his tough talk against Florida's insurance companies, vowing to uncover
any possible bad business practice by the industry.
"The insurance industry is tenacious. They are greedy, and they are
working hard, and they are skilled," Crist said. "So we have to
be just as tenacious and work as hard."