Florida hits Allstate in the moneymaker: Auto policies

Florida hits Allstate in the moneymaker: Auto policies

By BY RANDY DIAMOND and DARA KAM
Palm Beach Post Staff Writers
Thursday, January 17, 2008

TALLAHASSEE — Charlie Crist took the battle between insurance regulators and Allstate Insurance companies and kicked it up a notch Wednesday: The governor suggested Allstate customers rethink their policies.

“I’d go to another company,” Crist said.

The governor made his comments just hours after Office of Insurance Regulation Commissioner Kevin McCarty announced the state is barring Allstate from writing new policies of any kind in Florida, retaliation for the insurer’s refusal to produce subpoenaed information about how it sets property insurance rates.

The penalty turns the tables on Allstate, which has engaged in an aggressive plan to shed most of its Florida homeowner insurance business while at the same time growing its lucrative auto insurance lines. It’s been adding an estimated 3,000 new auto insurance policies a week – and that’s where McCarty’s suspension is aimed. “We’re going to hit them where it hurts,” he said. “We’re going to get their attention.”

The decision does not affect renewals of existing auto policies, and policies are not being canceled.

Still, the suspension will cost. By one Wall Street analyst’s estimate, the suspension could cost the insurer $10 million a year in lost business.

Allstate spokesman Adam Shores expressed surprise at the harshness of McCarty’s action and said that company officials “are evaluating our options.” Those options include filing a district court appeal.

Waiting on the sidelines are an estimated 1,200 Allstate agents and employees in Florida who can’t write new policies.

“We’re innocent bystanders,” said Keri Rayborn, the Florida lobbyist for the National Association of Professional Allstate Agents. “We can’t make the company provide the documents.”

Those documents were expected to shed light on why the insurer’s Florida subsidiaries have failed to deliver on lower rates for about 315,000 customers. In September, Allstate sought state approval for a property insurance rate increase of more than 40 percent, just three months after it agreed to reduce rates by an average 14 percent as part of the governor and legislature’s rate reduction plan.

The documents were also expected to provide a rare glimpse into how insurers work with ratings agencies, reinsurance companies and firms that predict hurricanes – and whether those groups work to keep rates unnecessarily high.

Allstate’s Shores said the company has turned over 40,000 documents and plans to produce more. However, Allstate balked at turning over paperwork it said would reveal trade secrets – although trade secrets must be kept secret under Florida law – and some material the company described as “irrelevant.”

So, while Allstate executives had shown up Tuesday for planned hearings, prepared to testify under oath about how the insurer calculates rates, they still hadn’t produced the state-subpoened documents. “A slap in the face,” fumed McCarty, who cut the sessions short.

“What do they have to hide?” Crist said. “Why are they stonewalling? Is there something so violative in their records that they’re not willing to give them to us?”

How long the company, the second-largest automobile insurance carrier in Florida, will be barred from issuing new policies “is totally up to Allstate,” McCarty said. He plans to lift the suspension when the documents he sought through the subpoena are provided.

Until then, insurance regulators are considering other penalties against the company, McCarty said. “The no-kidding rule is in effect,” he said.