Print

Email story

Comment

Email editor

Allstate eases big hike - for now

The insurance company will boost rates 9.9 percent now, and go for the balance of a 28 percent hike after review.

By JEFF HARRINGTON
Published June 30, 2005

Allstate has backed off a controversial plan to impose a 28 percent average rate increase on Florida homeowners' policies before getting state approval.

Instead, after several meetings with state insurance regulators this week, Florida's No.3 insurer agreed Wednesday to a compromise: It will raise rates statewide an average of 9.9 percent immediately and seek the balance of the double-digit hike after a public hearing and regulatory review.

"We believe we've struck a balance that benefits consumers and the OIR (Florida's Office of Insurance Regulation)," Allstate spokesman Ryan Priest said.

Florida Insurance Commissioner Kevin McCarty applauded the deal as a way for policyholders to express their opinions in a public hearing before they have to pay up. No hearing date has been set.

As part of the compromise, Allstate said McCarty promised to expedite the review of the second half of the filing, giving a decision by a target date of Aug.15.

But Valerie Beynon, a spokeswoman in McCarty's office, insisted late Wednesday there was no such promise of special treatment. State law requires McCarty's office to act on any rate filing within 90 days.

"Every filing is treated the same," Beynon said, "regardless of where it comes from."

Allstate Floridian, a separate company set up by the Illinois-based insurance giant, began alerting homeowners about the double-digit rate increase last week. The notices were justified, it said, under the so-called "use-and-file" law which allows insurers to impose rate increases and seek regulatory approval later. If the increase is subsequently rejected, policyholders are reimbursed.

But Florida Chief Financial Officer Tom Gallagher saw things differently and accused Allstate of ignoring a new state law that requires a public hearing whenever an insurer raises rates more than 15 percent.

Gallagher, formerly Florida's insurance commissioner, was upset to hear of the compromise reached by McCarty's office. It doesn't offer any "real relief" to policyholders, he said.

"This is just a smokescreen by Allstate to delay an outrageous rate hike without scrutiny by regulators," Gallagher said. He added that it is "ridiculous" that only one public hearing will be held for a major insurer with 640,000 policyholders statewide.

Allstate's moves, Gallagher added, beg for a review of the practice of "use-and-file" in Florida. Others have used the practice to impose immediate rate hikes but Allstate is the only one to since last hurricane season.

Allstate, which has maintained it followed state law initially, said the compromise will help the company stay financially sound.

The company maintains it needs at least a 9.9 percent rate increase immediately to cover the $1.6-billion it spent on reinsurance to prepare for this hurricane season. Insurers buy reinsurance as an extra layer of insurance to cover excessive losses.

The second-half of the filing, the company said, will reflect additional costs, such as administrative expenses and raising its reserves in light of Florida's four-hurricane season last year.

Last year, Allstate complained that it had minimal reimbursement from the state's hurricane catastrophe fund in the wake of heavy losses from hurricanes Charley, Frances, Ivan and Jeanne.

In addition to seeking higher rates, Allstate is in the midst of dropping about 12.5 percent of its 758,000 policies statewide, or 94,750 policies.

Homeowners who have received notice of the higher rate increase since last week will be shipped revised statements that reflect the partial increase, Priest said.

--Jeff Harrington can be reached at harrington@sptimes.com

[Last modified June 30, 2005, 00:58:11]