Court clears way for Allstate ban

Article Courtesy of The St. Petersburg Times

By Tom Zucco
Published May 14, 2008

TALLAHASSEE This time, the suspension stuck.

After four months of court challenges and clerical errors, Florida insurance commissioner Kevin McCarty was finally able Wednesday to enforce an order he originally signed Jan. 17 that slaps handcuffs on Allstate Corp., the state's fourth-largest property and second-largest auto insurer.

The 1st District Court of Appeal affirmed McCarty's order that Allstate's 10 Florida companies are banned from writing any new insurance policies in the state until the company turns over documents regulators say are key to an investigation into Allstate's rate-making practices.

McCarty has said the suspension will be lifted as soon as Allstate complies with subpoenas and gives the state the documents it wants.

Allstate will likely appeal the ruling to the Florida Supreme Court.

What the appeals court did Wednesday was deny Allstate's request for a new hearing. The court issued a similar ruling last month, but withdrew it within an hour after realizing it had released the decision a week too soon.

Gov. Charlie Crist and members of the Florida Legislature have bashed the Illinois insurer in recent weeks for everything from dropping half a million policyholders over the last five years, to using unapproved hurricane risk models to set rates, to possibly colluding with rating agencies and trade associations.

But the key charge has been that Allstate circumvented a 2007 Florida law that requires insurers to lower their rates. Before the company withdrew the request earlier this year, Allstate had asked for a 42 percent average statewide rate hike, the largest increase of any major insurer.

Both sides continue to negotiate a settlement, although regulators say they must receive the documents they've asked for before there is any discussion of fines, penalties or a lifting of McCarty's order.

Some key numbers:

Allstate insures about 300,000 homes and about 1.7-million cars in Florida.

As McCarty pointed out, this is all about stopping Allstate's lucrative auto business. Last year, Allstate wrote an average of about $564,000 a month in new auto business in Florida. The company sells about 3,500 new auto policies a week statewide.

Even though Allstate will still be allowed to renew policies, unless the ban is lifted, its total book of business is expected to shrink at least 10 percent a year.

Allstate recorded profits of $4.6-billion in 2007.

COURT ORDER -- MAY 14, 2008

COURT OPINION -- May 14, 2008