Print

Email story

Comment

Letter to the editor

Come clean, Allstate urged

State regulators try to pin down the insurer on how it sets rates.

By TOM ZUCCO, Times Staff Writer
Published January 15, 2008

TALLAHASSEE - Unless there's a last-minute deal, Florida will try something today it has never done before: pull back the curtain on the property insurance industry at a public hearing. Regulators will start with the state's third-largest insurer, Allstate Floridian.

In what is shaping up as the insurance equivalent of a heavyweight title fight, Allstate officials will face a panel of state regulators, including Office of Insurance Regulation general counsel Steve Parton, to explain how they set rates, and their relationship with rating agencies, hurricane-modeling companies, reinsurers and trade associations.

There's a lot more at stake than a fancy belt.

For months, Gov. Charlie Crist has accused the industry of price-gouging, profiteering and collusion after 31 companies, including Allstate, Travelers and USAA, did not lower their rates as much as regulators expected.

The reductions were supposed to be substantial. Following special legislation last January, Florida expanded its state reinsurance fund to allow private companies to reduce rates an average of about 24 percent.

Instead, 31 companies are seeking to raise rates an average of 13 percent. Near the higher end is Allstate, which wants to raise rates an average of 42 percent. The initial request was denied in November, just one day after Allstate made its pitch, and the company is appealing.

"The legislation enacted last January was very specific about its requirement that insurers reduce the rates they are charging for homeowners insurance," Florida Insurance Commissioner Kevin McCarty said in a statement. "We want to hear the reasons behind those companies' actions."

Parton said Allstate has cooperated with subpoenas sent to the company in advance of the hearing - for the most part.

"We have many, many documents," he said. "All that we need? No. We believe there are very important documents we have yet to receive. But one way or another, we will get them. I would suggest this hearing would not be the only hearing."

Unlike a rate hearing, Parton said regulators will look at Allstate's underwriting guidelines - how, where and at what cost it writes policies. And, most important, who influences those decisions.

"This hearing is far broader than (a rate hearing)," Parton said. "Claims practices, underwriting and trade practices, relationships with hurricane modelers and with rating organizations ... how all that may be driving rates."

While regulators stress that this is not a rate hearing, rates are at the core of the issue.

State Farm came within a month of a similar hearing last fall. Company officials had been sent subpoenas and a hearing date was set. But State Farm agreed to lower its rates from 7 to 9 percent, and the hearing was canceled.

Another difference between Allstate and State Farm is exposure to risk. Allstate of Northbrook, Ill.,has been steadily chipping away at its Florida book of business. Five years ago, Allstate had about 750,000 policyholders statewide. Today, it has about 350,000 policyholders, including about 15,000 in the Tampa Bay area.

State Farm has slightly more than 1-million policyholders statewide, roughly the same number it has had for several years.

Among the questions regulators will have, Parton said, is whether a company that reduces its policy count, and therefore its overall exposure to risk, shouldn't also reduce its premiums.

Allstate Floridian spokeswoman Amy Moore said the company, which took out a half-page ad in the St. Petersburg Times on Monday claiming it has lost nearly $1-billion over the past four years, has not violated state law, and that higher risks justify higher rates.

"Our ultimate goal is the protection of our customers." Moore said. "We can only achieve this goal through financial stability and rates that reflect Florida's extreme hurricane risk."

The going won't get easier after this week for Allstate and other companies seeking a rate hike. Crist has appointed three trial lawyers to look into grounds for a class-action lawsuit against the industry, and the Florida Senate recently created a committee that will conduct its own hearings next month.

"It's not a duplication of effort," Parton said. "We're pleased the Senate is doing this. There were commitments made by the industry, and they (lawmakers) have questions as to what's going on."

But Parton gets to go first, starting this morning.

"I'm expecting to have a good time," he said. "And Allstate not to."

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

Follow the hearings

The Florida Channel will broadcast the Allstate hearings live on the Web at www.wfsu.org/tfc/index.html. The hearings begin at 9:30 a.m. today and Wednesday.

[Last modified January 14, 2008, 23:27:53]