Allstate agrees to pay fine, cut property premiums and add policies

Article Courtesy of The Sun Sentinel

By Julie Patel
Published August 16, 2008


Allstate, 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 insurance policies.

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.