Allstate to Cut Rates, Write More to Resolve Florida Litigation

Florida Insurance Commissioner Kevin McCarty reached an agreement with the Allstate Companies that includes a $5 million fine, the lowering of homeowners rates in the state by 5.6 percent and a vow by the insurer to insure 100,000 more policies.

The agreement resolves issues stemming from Allstate’s September 2007 rate filing, a Jan. 15 public hearing and related subpoenas issued last October by the Office of Insurance Regulation.

The agreement requires Allstate to lower its homeowners insurance rates in all territories of the state by 5.6 percent within 30 days, for a total reduction of 19.8 percent when including the 14.2 percent reduction that took effect June 1, 2007. Allstate also must write 100,000 new homeowners insurance policies over the next three years; and Allstate must cancel a $175 million surplus note it issued to its Florida companies.

Allegations against Allstate included failure to freely provide the documents requested in the October subpoenas; falsely asserting trade secrets in its September rate filing and false certification of its September rate filing.

Of the 100,000 new policies to be written over the next three years, 50,000 must be basic homeowners, and 50,000 must be condominium, renters and other residential policies.

In addition, Allstate has agreed to cooperate with an OIR investigation into the relationships between insurers, trade associations, rating organizations, modelers, reinsurers, reinsurance brokers and others.

Further, Allstate must continue to cooperate with the OIR’s investigation of its claim-payment practices — including matters related to a 1992 McKinsey report.

Allstate was suspended Jan. 17 after the commissioner abruptly halted a Jan. 15 hearing that was to look into its reinsurance program and relationships with insurance rating, modeling and trade organizations.

Allstate was to have provided all appropriate company documents related to the above topics by Jan. 15 but failed to do so. Instead, the OIR said it received 51 pages of objections to the subpoenas.

Allstate appealed the Florida suspension but lost.