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Allstate Home Insurance Rate Denied
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Published: November 17, 2007
TAMPA - State regulators on Friday denied a series of home insurance rate increases proposed by five Allstate companies.
The proposed rate increases, which ranged from 27 percent to more than 43 percent, were rejected by Florida's Office of Insurance Regulation because the Allstate group failed to comply with a new state law that requires home insurers to pass on savings from cheaper backup coverage provided by the state, said Florida Insurance Commissioner Kevin McCarty.
"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," McCarty said.
Allstate has 21 days to appeal the decision.
Allstate spokesman Adam Shores said the cheaper reinsurance didn't cut the company's costs enough and that the higher rates are needed to cover all the claims from a major hurricane.
"We stand by the rates we filed," Shores said. "We still need to be in a position to have capital in place to pay claims and meet the promise we've made to our customers."
Asked if rating agency A.M. Best played a role in determining the level of backup coverage Allstate purchased, Shores said: "We know what it will take to get a positive rating from A.M. Best, and that means purchasing adequate levels of reinsurance."
Allstate's proposals would have raised rates, on average, by 126 percent in Pinellas County, 51 percent in Hillsborough County and 21 percent in Pasco County.
Allstate has about 400,000 homeowner policies in Florida, including more than 28,000 in Hillsborough, Pinellas and Pasco counties. Allstate says it is still recovering from the 2004-05 hurricane seasons, when eight hurricanes hit the state, and has been shedding policies.
To bring rates down, the Legislature and Gov. Charlie Crist approved a $12 billion expansion of the Hurricane Catastrophe Fund, which provides backup insurance, known as reinsurance, to companies at a cheaper price than the private market.
By expanding the Cat Fund, insurers were able to buy more reinsurance at a cheaper rate. The savings were supposed to be passed on to policyholders in the form of lower premiums.
Several insurers, however, including Allstate, have asked to raise rates to cover the cost of added reinsurance, claiming the additional backup coverage is needed because of the increased risk of a catastrophic event.
"It was the intent of Governor Crist and the Florida Legislature that the lower-priced reinsurance would enable insurance companies to pass along significant savings to their policyholders," McCarty said.
Information from The Associated Press was used in this report. Reporter Russell Ray can be reached at (813) 259-7870 or rray@tampatrib.com.
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