Allstate's 16.3 Percent Rate Hike Is Approved

Despite an initial rejection, Allstate Floridian won approval for a 16.3 percent statewide average rate increase on homeowners insurance.

Consumer advocates and state legislators are outraged that Allstate Floridian won approval for a 16.3 percent average insurance rate hike that was initially rejected.

Florida's Office of Insurance Regulation passed on the fanfare when it approved the rate hike two weeks ago, filing instead a consent order filled with legal jargon about the approval. The order still wasn't posted on the department's website Thursday afternoon.

Allstate's sister company, Allstate Floridian Indemnity, which also writes homeowners policies in Florida, got its 24.4 percent rate increase approved as well.

Last October, regulators had announced it was denying Allstate's rate request.

''Every homeowner in the state, not just those who are insured by Allstate should be outraged by the fact that our appointed insurance commissioner feels no obligation to include them in or inform them of this decision,'' said state Sen. Ron Klein, D-Boca Raton.

Among various insurance-related proposals Klein has introduced in recent weeks, he's calling for the state to bring back an elected insurance commissioner and the creation of an independent insurance consumer advocate office.

Bill Newton, executive director of the Florida Consumer Action Network, a statewide consumer advocacy group, contends the public has to have a greater voice in the rate-making process.

''If [insurers] had to negotiate with consumer groups, we would get a vastly different outcome than these closed door negotiations,'' Newton said.

He wonders where is Allstate's added risk to justify higher rates since the Florida companies haven't written new policies since the 2004 hurricanes. And the parent company overall reported an operating profit for the year, despite such major storms as Hurricane Wilma in Florida and Hurricane Katrina in the Gulf Coast.

Allstate officials contend the storms of 2004 and 2005 wiped all the profit it had made in Florida since Hurricane Andrew.

Allstate said the new rate increase is effective on policies renewed on or after Oct. 3.

According to state officials, Allstate made changes to its initial rate increase request to win approval. David Foy, OIR's chief of staff, said Allstate, which is the third-largest home insurer in Florida, committed to use ''every single dime'' from this rate increase to purchase reinsurance to cover future losses.

Last week, Allstate's parent said it has reinsurance agreements in place for the 2005 and 2006 hurricane seasons. Reinsurance is insurance for insurers, covering a portion of the claims these companies face from massive storms.

Until last year, Allstate hadn't purchased reinsurance. After the 2004 storms, Allstate Floridian's reserves were wiped out and the parent company was forced to add $317 million to shore up the Florida unit.

Last May, the company received $375 million in additional capital from its parent; $159 million was tapped for Allstate Floridian after Wilma.

Allstate's rate hike request had raised concern among consumers and lawmakers last year because the company took advantage of a state provision allowing it to put in place higher premium rates and then file for the necessary approvals from regulators.

Allstate broke up its rate request into two parts. It won approval for one -- an average 7.9 percent hike statewide -- and public hearings were held on the second. The second one was eventually rejected by OIR in October. Allstate then asked for an arbitration panel to reconsider its rate hike.

Steve Burgess, the state's consumer insurance advocate, objected to Allstate's inclusion of out-of-state nonhurricane losses in the data it used to support its proposed rate increases in Florida.

State officials also didn't let Allstate use such data nor private catastrophe computer models in calculating the higher rates. It was required to use catastrophe factors prepared by the insurance department.

The company also agreed to pay $75,000 to cover the cost of arbitration. However, Allstate and OIR settled before the arbitration got under way.

We can make the worm turn!!!