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Letter to the editor

State rebuffs Allstate increase

After the quick "no," Florida's third-largest property insurer is weighing its options.

By TOM ZUCCO, Times Staff Writer
Published November 17, 2007

It was a record rejection.

Less than 24 hours after the Allstate group appeared at a hearing seeking to raise property insurance rates in Florida by more than a third, state regulators just said no.

Allstate Corp., the third-largest property insurer in Florida, had sought the highest rate hikes of any major insurer in the state - 43.4 percent for Allstate Floridian policyholders and 27.4 percent for Allstate Indemnity. Two smaller Allstate companies, Encompass Floridian and Encompass Indemnity, had sought rates hikes of 39.7 percent and 41.6 percent, respectively.

In counties such as Pinellas, the rate hike would have meant an average 125 percent increase. In other counties, such as Pasco, the average increase would have been about 21 percent.

Regulators argued that Allstate used a variation of a hurricane risk model that has not been approved by the state. Another concern was that Allstate was asking for higher profits and more backup coverage, or reinsurance, at the same time the company is cutting policies and reducing its exposure.

Allstate has dropped to less than 400,000 homeowner policies now from about 750,000 five years ago. The Tampa Bay area accounts for about 18,000 Allstate customers.

But more than anything, regulators want Allstate to adhere to changes in Florida law.

"The rates proposed by the Allstate companies do not pass along all the savings reasonably available as a result of the expansion of the Florida Hurricane Catastrophe Fund," Insurance Commissioner Kevin McCarty said in a statement Friday.

McCarty was referring to legislation passed in January that made cheaper, state-backed reinsurance available to insurers, with the savings passed on to policyholders. State Farm, Florida's second-largest property insurer, recently agreed to lower its rates an average 9 percent statewide.

But several dozen companies, including Allstate, USAA, Hartford and Florida Farm Bureau, have asked instead for increases.

Tom Zutell, a spokesman for the Florida Office of Insurance Regulation, said the one-day turnaround from hearing to ruling was the shortest since the law changed.

"But we have been receiving information from Allstate for many weeks," Zutell said. "We were well aware of the contents of their filings. We had all of our ducks in a row."

Allstate, which also faces more hearings in January surrounding its underwriting practices, says it is evaluating its options. The company can ask for an administrative hearing and fight the decision in court.

In the meantime, homeowner rates previously submitted by the four companies - including rate reductions of about 14 percent for Allstate Floridian and Allstate Indemnity- will remain in effect until the process is concluded.

"The bigger issue doesn't change the fact that we need this increase to be adequately prepared to pay claims," Allstate spokesman Adam Shores said Friday. "It ultimately helps us stand by our customers."

Tom Zucco can be reached at zucco@sptimes.com or (727) 893-8247.

[Last modified November 16, 2007, 23:20:35]