Florida Subpoenas Allstate Over Home Insurance Rate Increases, Industry Ties

By Brian H. Kern
October 16, 2007

Florida officials have subpoenaed Allstate Insurance and its subsidiaries to get the insurer to explain why it is not lowering homeowners insurance rates in the state and to defend its dealings with the industry's risk modeling and rating organizations.

The subpoenas direct the Allstate companies to appear at a January public hearing in Tallahassee before the Office of Insurance Regulation to testify regarding the companies' reinsurance costs and their relationships to risk modeling companies, insurance rating organizations or insurance trade associations.

Gov. Charlie Crist and Insurance Commissioner Kevin McCarty announced the action at a news conference at which they questioned whether Allstate was living up to "the spirit and the letter" of a state law that requires insurers to pass along savings on reinsurance to the public.

"The legislation enacted in January was very specific about its requirement that insurers reduce the rates they are charging for homeowners insurance," said McCarty. "We are continuing to investigate those companies that appear to be ignoring the intent of the legislature in its efforts to reduce premiums to consumers, and we want to hear the reasons behind those companies' actions."

The subpoenas have been issued to Allstate Floridian Indemnity Co., Allstate Floridian Insurance Co., Allstate Fire and Casualty Insurance Co., Allstate Indemnity Co., Allstate Insurance Co., Allstate Property & Casualty Insurance Co., Encompass Floridian Indemnity Co., Encompass Floridian Insurance Co., Encompass Indemnity Co., and Encompass Insurance Co. of America.

The subpoenaed companies combined comprised 7.9 percent of Florida's residential property market as of June 30. They write more than 394,000 policies in the state.

Allstate Floridian Indemnity and Allstate Florida Insurance Co. are requesting rate increases of 28.3 percent and 41.9 percent respectively. Encompass Floridian Indemnity is requesting a 38.4 percent increase, and Encompass Floridian Insurance Co., is requesting a 39.7 percent increase, according to state officials.

Gov. Crist called the rate increase requests "outrageous" and vowed that the state would continue to press insurers for savings.

"Many Florida homeowners have been disappointed that property insurance rates have not dropped more, and I, too, am disappointed," Crist said. "We have significant reason to believe that some insurers are violating both the spirit and the letter of the law passed earlier this year and may not be passing savings along to the customer. Instead, we have seen outrageous rate hike requests."

Calls to Allstate for comment were not immediately returned.

Crist said the state would continue to hold the insurance industry's feet to the fire over rates. "The insurance industry is tenacious, but we are, too," he said. "We want them to be profitable - not profiteering."

Asked if there is a threat of collusion based on the reference to other organizations, McCarty said insurance trade organizations will be closely evaluated as key players during the investigations. He said no one is being accused of anything.

Crist echoed McCarty saying, "We're not accusing anybody. But we sure are tracking them down."

The public hearing is scheduled for Jan. 15 and 16, 2008, at 9:30 a.m. at the Senate Office Building in Tallahassee.

Sources: Florida Office of Insurance Regulation
Office of the Governor of Florida