Allstate Accused Of Hiding Rate Activity
By MATT BRADY
National Underwriter News
June 24, 2005
Florida Chief Financial Officer Tom Gallagher accused Allstate yesterday of seeking to avoid public scrutiny of a 28 percent rate increase, which the company said it needs to stay financially healthy.
It has become apparent that Allstate Insurance Company plans to file a 28 percent statewide average rate hike in July but has already begun sending the bills to Florida homeowners," Mr. Gallagher said. "Allstate's move to implement a rate hike and then file for approval blatantly ignores a new law that requires a public hearing for any rate request exceeding 15 percent. This is unconscionable."
Mr. Gallagher said the insurer has "broken faith" with Florida consumers. He added: "This conduct is even more reprehensible considering just four months ago Allstate's chairman, Edward Liddy, characterized the company's 2004 financial performance as a great year for Allstate and said, We are growing and generating solid returns for our shareholders.
This is a company that says one thing to analysts and investors and something else to its policyholders when it sticks them with the bill, stated Mr. Gallagher.
In response, Phil Lawson, president of Allstate's Florida unit, Allstate Floridian, argued that rate increases are needed, especially in light of last year's series of hurricanes, for which, he said, the company has paid out over $2 billion in claims.
Allstate Floridian's recent actions are intended to enable the continued availability of quality insurance protection to our state's residents," Mr. Lawson said. "That's especially critical as we enter the start of the 2005 hurricane season."
Mr. Gallagher said that he is urging state Insurance Commissioner Kevin McCarthy "to do everything in his power under Florida law to stop Allstate from circumventing the law and to tell Allstate to cease and desist billing this unapproved rate increase to Florida homeowners."
Mr. Lawson indicated that the company would not object to a public hearing on its rate increase.
We believe the proposed Allstate Floridian rate increase is absolutely necessary, justified and in compliance with the law," he said. "We welcome the opportunity to share with the public, including our policyholders, why a rate increase is a necessity in order to help Allstate Floridian strengthen its ability to serve customers during the 2005 hurricane season and beyond."
In fact, Mr. Lawson added, Allstate needed to implement rate increases much earlier but held off in respect to a request from the state to not increase rates until reforms to Florida's hurricane insurance market were passed.
"The company had an actuarially justified rate need before the legislative session began and refrained from submitting it during the legislative session to honor the request made by state officials," he said.
"Allstate Floridian believes that the legislature needs to take additional crucial steps to enhance the state's hurricane catastrophe fund to provide more efficient financial assistance to Florida homeowners," said Mr. Lawson.