Despite Record Profits
Allstate Obtains Substantial Rate Increase From "BEHIND CLOSED DOORS"!
February 7, 2006
Florida insurance regulators, without public notice, conceded weeks ago to Allstate's request for statewide rate increases over 16 percent and double that in many places.
The approval, awarded Jan. 25, 2006 in a consent order signed by Insurance Commissioner Kevin McCarty, gives Allstate the blessing for premium hikes it put into effect last October.
The decision affects some 606,000 remaining customers of Allstate Floridian and Allstate Floridian Indemnity, with average increases of 16.3 and 24.4 percent, respectively.
It means average increases in Brevard County of 32.7 and 20 percent, Collier County of 23.7 and 37.9 percent, Escambia County of 31.8 and 29.9 percent, Indian River County of 28.2 and 28.6 percent, Lee County of 23.8 and 30.9 percent, Leon County of 0.4 and 13.4 percent, Santa Rosa County of 37.1 and 41.5 percent.
Allstate's request was initially challenged by regulators, and the company took its case to an arbitration board. The panel never met. Regulators and company officials instead negotiated a settlement finalized without notice last month.
In trade for the rate hikes it wanted, Allstate agrees to use its extra income - money that was requested to increase profits - to purchase backup insurance instead.
''Their decision was they needed extra money to attract (investment) capital. Our position is: no, you don't,'' said Steve Parton, general counsel for the Office of Insurance Regulation.
The company said its predictions of continued active hurricane seasons that are to blame.
''The rate increase is necessary to protect our customers from losses arising from future storm seasons, similar to 2004 and 2005,'' Allstate spokesman Ryan Priest said on Friday.
Sen. Ron Klein, D-Boca Raton, was livid about the stealth of regulators' decision.
''It is bad enough that the (Office of Insurance Regulation) approved this unjustified rate increase for a company that posted record profits last year, but that the OIR sees no need to even inform the public of this decision shows a complete disregard for the homeowners of this state,'' Klein said.
OIR spokeswoman Beth Scott was apologetic.
''Our policy is we don't routinely publicize when rate increases have been approved,'' Scott said, but given the controversy over the Allstate filing, ''we regret not sending something out.''
Florida's insurance consumer advocate had other issues about how the case unfolded.
''My concerns are more along the lines of whether I have an opportunity to review filings and participate in the filings,'' said Steve Burgess.
Burgess opposed the original rate hike. He attempted to intervene in the arbitration hearings between Allstate and OIR. However, those hearings were postponed and Burgess' request was never ruled on, keeping him in the dark about negotiations between regulators and the state's second-largest private property insurer.
Therefore, Burgess said, he does not know if his problems with Allstate's filing were addressed.
Regulators in early October told Allstate they intended to reject its rates request, citing Allstate's failure to provide enough information about computer models it used to predict hurricane losses, use of a model not approved by the state, and inclusion of costs for reinsurance it had not yet bought.
Allstate agrees to drop the use of its private hurricane risk model, and pay the state $75,000 to cover regulatory costs.
In a concession that could have far-reaching impact, Allstate also agreed to give up one of its strongest tactics against the OIR, Parton said. In this and past rate-denial cases, Allstate has used arbitration panels to argue the state insurance rules themselves are invalid.
''They've agreed to not do that again,'' Parton said. ''That is significant.''
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