Allstate Corp. is raising rates for 144,000 Louisiana homeowners who get their insurance coverage from two Allstate companies.
The company announced that about 71,000 homeowners insured by Allstate Insurance Co. will see their rates increase by 11.3 percent, while 73,000 Allstate Indemnity Co. policyholders will see an average increase of 5.4 percent as of March 1.
Allison Hatcher, spokeswoman for Allstate’s southern region, says the higher premiums are the result of the rising cost of reinsurance, an industry-wide trend.
“Allstate is making responsible business decisions to remain strong and positioned to deliver on its promise to customers,” Hatcher said. “This includes ensuring that our policies reflect the costs of providing insurance, including the cost of reinsurance.”
Reinsurance is the coverage that insurance companies buy to protect themselves from excessive claims. Typically that coverage makes up a larger portion of the premium in coastal areas, where there is greater risk of hurricane damage.
Rates for property and casualty reinsurance rose by an average of 7 percent in 2012, according to the Guy Carpenter U.S. Property Catastrophe Rate on Line Index.
The Allstate Insurance increase will generate $11.9 million, while the Allstate Indemnity increase will generate $5.0 million, according to records at the Louisiana Department of Insurance. Based on those numbers, the average annual increase would be $168 for Allstate Insurance policyholders and $68 with Allstate Indemnity.
The Allstate group of companies, which includes some other subsidiaries, is the second-largest insurer in the state behind State Farm.
Insurance Commissioner Jim Donelon told The Advocate the rate increase will be the same regardless of the area percentagewise because the change is entirely due to higher reinsurance charges.
“Pre-Katrina, Allstate was one of the big companies that reinsured themselves through a sister company, in many cases if not all cases,” Donelon said. “This (rate increase) is 100 percent third-party reinsurance.”
Typically, insurance companies that base all or part of a rate increase on reinsurance just bring the Insurance Department the records showing the cost and it is passed along to consumers, Donelon said.
That’s a good thing, he said, because reinsurance is the answer to Louisiana’s coastal properties’ problem. Reinsurance allows the state to spread the risk around the world, Donelon said.