Insurance savings shrink

Cuts for property will be well under what the state had promised.

Published March 13, 2007

Those property insurance rate cuts state regulators promised beleaguered homeowners two weeks ago are flowing in, but they're far short of the amounts that were forecast.

Officials for Allstate Floridian and its sister company, Allstate Floridian Indemnity, on Monday proposed lowering their premiums a statewide average 14 percent starting June 1 as part of the state's efforts to reduce the cost of property insurance.

While that may seem like good news for Allstate's 350,000 policyholders, it is far less than the average 24 percent industry decrease state officials said homeowners should expect.

Coupled with Nationwide Florida's submission last week for a rate cut of 4.5 percent, and estimates by State Farm Florida and state-backed Citizens Property Insurance that their reductions would be in the 7 to 10 percent range, Allstate's filing means the state's four largest insurers, or about three quarters of Florida's residential property insurance market, plan a substantially smaller decrease than the statewide average.

The filing also allows Allstate to continue to drop policies.

"I'm bewildered by it," Sen. Bill Posey, R-Rockledge, chairman of the Senate Banking and Insurance Committee, said of rate filing. "All we've heard is that reinsurance is the problem. So the state made available cheaper reinsurance. That's what we did in the special session."

Posey cautioned that while Allstate's rates have been filed, they have not been approved.

"And if they can't substantiate the filings," Posey said, "they can't get it approved. I'm looking forward to the insurance commissioner analyzing the information and telling us what happened."

In January, Florida lawmakers made inexpensive, state-backed reinsurance, which is insurance for insurance companies, more available to private insurers only if the savings were passed on to policyholders.

To ensure companies didn't pad their expenses, lawmakers also ruled that if an insurer bought reinsurance on the private market, the cost had to be the same as or lower than state reinsurance.

Regulators claimed the average savings to policyholders statewide would be 24 percent. But at least with the biggest companies, that prediction hasn't come close.

The third largest property insurer in the state, Allstate officials say they are passing on all the reinsurance savings they can.

"We obviously feel this is an appropriate rate reflecting the cost of reinsurance we need to purchase," said Allstate spokesman Adam Shores.

One of the consequences of making a rate filing is an immediate lifting of the recent state moratorium on policy cancellations. Last week, after Nationwide Florida submitted its 4.5 percent rate decrease, the company sent out 25,000 nonrenewal notices.

Shores said Allstate will continue the nonrenewal policy it announced last year that included dropping about 225,000 policies as they come up for renewal.

"I can't speak for Nationwide," Shores said, "but the difference between Nationwide and us is that we have an independent, private carrier Royal Palm Insurance to take the policies, so there is already an option."

Taken by itself, Allstate's filing came as welcome news to Gov. Charlie Crist.

"Listen, 14 percent less? When was that ever heard of? When has that ever happened in the history of our state?" Crist said Monday.

"I mean, you know, it's a new day. It may not be 20 percent or 15 percent, but 14 percent? That would not have happened before the Legislature did what they did. So I am delighted. I'm not going to complain about rates going down."

Crist also said an insurance company met with his staff last week, "and wants to bring in $100-million of coverage to Florida." He did not name the company.

Regulators insist that if their review shows the numbers submitted by any insurance company aren't low enough, both now and when the companies make more complete filings by Sept. 30, they will hold the companies accountable.

"We knew some of the bigger companies may be different (than the 24 percent average)," Bob Lotane, a spokesman for the Florida Office of Insurance Regulation, said Monday. "We are going to review these.

"If they're blowing smoke and not passing along the savings, they may be able to hide it now," he said. "But definitely when they (make their second filing) all the cards will be on the table, and we'll make sure they're passing all (the savings) along."

The property and casualty insurance industry made almost $60-billion last year in the United States, and Florida-based companies generated profits of about $2.75-billion, said the Insurance Information Institute.

But a homeowner revolt prompted the Legislature to force insurance companies to give some of that money back to policyholders. The question is how much. "Obviously the goal is to get to the original numbers we set out this session, but I'm pleased to see we do have a reduction," said Senate President Ken Pruitt, R-Port St. Lucie.

Staff Writer Shannon Colavecchio-Van Sickler contributed to this report. Tom Zucco can be reach at zucco@sptimes.com or (727) 893-8247.

Rate reductions

Regulators forecast an average 24% cut.

Nationwide: 4.5 percent.

Allstate: 14 percent

State Farm: 7 percent (estimated)

Citizens: 8 to 10 percent.

Proposed rate reductions of the top four property insurers in Florida. Regulators had forecast an average 24-percent decrease.

Nationwide - 4.5-percent.

Allstate - 14-percent

State Farm - 7-percent (estimated)

Citizens - 8 to 10-percent (estimated)

(State Farm and Citizens will file rate reductions this week.)