Florida orders Allstate to turn over records on property insurance

Article Courtesy of The Sun Sentinel

By Kathy Bushouse and Tonya Alanez
Published October 17, 2007


The 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

Gov. Charlie Crist, right, and Insurance Commissioner Kevin McCarty, conduct a news conference in Tallahassee to talk about property insurance issues.

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 completely irrational."

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."