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State Doubts Allstate Dealing Good Hand

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By JEROME R. STOCKFISCH and CATHERINE DOLINSKI, The Tampa Tribune

Published: January 17, 2008

Updated: 01/17/2008 12:12 am

TALLAHASSEE - Regulators' brash move to boot Allstate Corp. out of Florida's future auto insurance market sharply raises the stakes in the state's investigations of additional homeowners insurance companies and how they set their rates.

Insurance Commissioner Kevin McCarty said the state would "hit them where it hurts" in going after the company's lucrative auto business, even though it was Allstate's homeowners' business that was under investigation.

Wednesday's move was criticized by industry insiders and some lawmakers as politically motivated grandstanding by an ally of a populist governor. With a handful of additional homeowners' providers either under investigation or being asked to send executives to testify under oath in Tallahassee, however, the state says it has sent a clear message.

"I cannot and will not allow this to continue," McCarty said Wednesday morning in announcing he would suspend Allstate's certificate of authority to write auto policies in the state until the company complied with subpoenas served in October. "In view of Allstate's ongoing, blatant disregard for the laws of the state of Florida, I have little choice but to take action, to clearly communicate that Florida will no longer be held hostage by this company and its practices."

Allstate said it had not received the order late Wednesday and was evaluating its options.

"We were surprised at the Office of Insurance Regulation's actions ... based on our dealings with them over the course of several months and dozens of phone conversations," the company said in a statement.

The suspension affects only future business in Florida, and existing Allstate policies will continue to be honored, according to the regulators.

Three companies providing homeowners insurance in Florida - State Farm, Cincinnati Insurance Co. and Auto-Owners Insurance Co. - also have been subpoenaed by the regulators regarding the companies' reinsurance programs and their relationships with risk modeling companies, insurance ratings organizations and trade associations.

Regulators are trying to find out why some companies have sought rate increases even though the state has increased its own exposure to hurricane damages in an effort to provide cheaper private coverage to homeowners.

A spokesman for the regulators office said those three companies were cooperating with the state.

Meanwhile, the state Senate has convened a Select Committee on Property Insurance Accountability to examine the same issues.

Executives from Hartford, American Strategic Insurance, Nationwide, Florida Farm Bureau and Allstate have been asked to testify before the committee next month. They represent a cross section of companies, including those whose rate reductions were approved by the state and those whose requests for rate increases were denied.

In light of the move against Allstate, those executives "have reasons to be concerned," said Rep. Don Brown, R-DeFuniak Springs, an outspoken critic of the Legislature's handling of the homeowners insurance crisis. "But I wouldn't be shaking in my boots if I were them; I'd be busy finding the quickest path out of Florida."

Representatives of most of the insurers being questioned in Florida could not be reached for comment.

Move Called Bad Ploy

Robert Hartwig, president of the New York-based Insurance Information Institute, was critical of Florida's move.

"Threats of fines, administrative sanctions and jail time for CEOs are not going to be the means by which the problems in Florida's homeowners insurance market are going to be solved," Hartwig said.

The action against Allstate demonstrated growing hostility between the company and regulators. The subpoenas issued in October attempted to find whether there was collusion between Allstate and those who provided computerized hurricane models. Regulators suggest Allstate intentionally may have relied on models that conclude the likelihood of storms is greater than it actually might be.

Also, regulators want to know why - shortly after the state expanded its exposure to catastrophe by offering cheaper state-backed "reinsurance" - influential rating agencies began to request companies maintain higher levels of reinsurance to maintain favorable ratings. The state also is examining interactions between insurers and their trade groups to determine whether they colluded in rate-setting.

Allstate said it has provided nearly 40,000 pages of information to the regulators, which summoned Allstate to the Capitol this week for what was to be a two-day public hearing on its rate-setting procedures beginning Tuesday.

McCarty gaveled the contentious hearing to a close within hours, saying Allstate had failed to produce adequate documents and was continuing to stonewall.

Missouri Probing Allstate

On Wednesday, McCarty pointed out that regulators in Missouri are at odds with Allstate in an investigation. Missouri has fined Allstate $25,000 a day for its failure to cooperate, and the tab has reportedly reached $2.5 million.

Allstate's Florida auto business was worth $1.2 billion in premiums in 2006, the latest figures available, and the company has increased business in the state by about $100 million in premiums a year.

Gov. Charlie Crist, who vowed to bring heat to property insurers during his campaign and has been critical of the industry, applauded McCarty's move.

Meeting with reporters Wednesday in Tampa, the governor was asked whether he was concerned the state's get-tough stance would drive insurers such as Allstate out of Florida altogether.

"Am I concerned they could pull out? You mean the company that's charging our citizens the most? I'm not concerned about that at all. Good riddance to them."

Reporter Rich Shopes contributed to this report. Jerome R. Stockfisch can be reached at (813) 259-8402 or jstockfisch

@tampatrib.com. Catherine Dolinski can be reached at (850) 222-8382 or cdolinski@tampatrib .com.

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