Mississippi Insurance Chief Pushes Back At Allstate Rate Complaint

Allstate Insurance alleges that Mississippi’s insurance chief ignored an internal actuarial report that justifies the insurer’s request for a 44 percent rate increase when he denied the bid. But Insurance Commissioner Mike Chaney says that he reviewed not just one but several actuarial reports in deciding to reject Allstate’s rate request.

Allstate spokeswoman April Eaton said an actuarial report that the Mississippi Insurance Department has actually says a rate hike as high as 57 percent is warranted.

“We are trying to figure out why the details in report were not used,” Eaton told Insurance Journal.

Chaney is pushing back against the giant insurer for drawing attention to only one out of several reports that his department reviewed. He said he also reviewed one that concluded that less than half of what Allstate is seeking for an increase is justified.

Chaney said he keeps all actuarial reports in perspective because they rely upon the data supplied by the insurers. “Garbage in, garbage out,” he said.

Chaney said it’s not all about the numbers. A state regulator must weigh other factors as well in deciding on rate filings, he told Insurance Journal.

“Actuarial reports are mathematical calculations and the job of a commissioner includes looking at more than that,” Chaney said.

He said that when considering insurance rate changes he must also consider any disruption to the marketplace as well as the effect on policyholders among other issues. In the Allstate case, he also had questions about the hurricane loss prediction model the insurer used in its calculations.

He said he asked Allstate for additional information on its experience in Mississippi but he did not get satisfactory answers to all of his follow-up questions.

Chaney said his department has “worked very hard, very diligently, very openly and very honestly with Allstate on this rate increase” but he stood firm on his decision. “I will not approve a 44 percent rate increase for Allstate without a court order,” he insisted.

Allstate says it needs the rate increase because its losses in the state are rising.

“We believe our rate filing is justified because of the loss we are experiencing, due to the risk present in the state and the increase in claims,” Allstate’s Eaton said. “We are seeing an increased frequency in losses from home fires, home burglaries, water damage and liability claims.”

Eaton said the need for a large rate increase is also partly due to the insurer not having had any rate increase in the state since 2008. Allstate’s last homeowner rate change in Mississippi — about 14 percent– was in September 2008. Chaney’s denial of the 44 percent request last week came eight months after he rejected what Allstate said was a 59 percent request, but Chaney maintains was more like a 65 percent hike.

Chaney pointed out that other insurers in the state have sought increases but they are far less than what Allstate is seeking.

“I don’t want a fight with Allstate but you have to wonder why they would do this,” Chaney said, maintaining that Allstate management has been quoted that part of its strategy is to price itself out of the coastal market.

“Policyholders should not be penalized for bad management decisions,” Chaney said.

Chaney questioned why Allstate closed its claims office in Mississippi last year if the company is experiencing more losses.

“We are perplexed why they closed their claims office and terminated 76 employees if their claims are going up. They said they didn’t have enough claims to justify it,” Chaney said.

Allstate says it still has remote claims representatives in the state and enough resources locally to handle the situation.

Allstate has until Oct. 20 to request a public hearing challenging Chaney’s denial of the 44 percent rate increase. It could also file a new request. “We’re still evaluating our steps,” said Eaton when asked what the insurer’s next move will be.

Chaney said that he hopes Allstate will come back with a “more reasonable” figure. He said he does not want the company to pull out of the state but warned that if it does, it would seriously harm Allstate’s reputation.