By Robert Jablon
California Orders Allstate to Cut Home Insurance Rates 28.5%
Allstate Corp. has been ordered to cut its California homeowner insurance rates by more than 25 percent, a move that will save consumers an estimated $255 million a year, state Insurance Commissioner Steve Poizner said.
Poizner signed an order rejecting Allstate’s request for a 9.3 percent increase and instead mandated a 28.5-percent rollback in rates for about 850,000 customers. The reduction will save an average homeowner about $242 a year, Poizner said. The new rate takes effect at the end of July.
“When families are struggling to make ends meet, when gasoline prices are through the roof, when the economy is struggling, this is money straight into the pockets of consumers,” Poizner said in a telephone interview.
Allstate spokesman Peter DeMarco initially said in a prepared statement the company was disappointed by the order but would comply.
However, Allstate had not decided whether to appeal the state decision, DeMarco said in a subsequent phone call.
“We’re working with the (insurance) department to determine the specifics of the order in detail,” he said.
Allstate’s stock closed at $44.90 a share the day the announcement was made, down 0.92 cents, or about 2 percent.
Poizner’s order ends a two-year effort by California’s third-largest insurer to win approval for a rate hike.
The commissioner said Allstate had sought reimbursement for some costs that were not permitted under California law. He also disagreed with the company’s projections of future costs.
Allstate announced last year that it would stop writing new homeowner policies in the state, although it would continue current contracts. It said the move was to help control its exposure to catastrophes in California, which is prone to wildfires and earthquakes.
Thousands of claims from the October 2006 wildfires in Southern California resulted in more than $300 million in losses, the company said.
Poizner was not concerned that the rollback might prompt Allstate to pull out of the market altogether and reduce consumer access to homeowner policies. California is the fourth-largest insurance market in the world, he pointed out.
In 2006, when then-Insurance Commissioner John Garamendi ordered Allstate and several other insurers to justify their rates. State Farm, Farmers and Safeco responded by slashing their rates a minimum of 18 percent.
Poizner said he has ordered $1.7 billion in reductions on auto and home insurance rates in his 18 months in office. Earlier this year, he ordered Allstate to cut its auto insurance rates by 15.9 percent.