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ALLSTATE SETTLES DISPUTE
(Tampa Tribune (FL) (KRT) Via Acquire Media NewsEdge) Aug. 16--UPDATED: 54 MIN. AGO
TAMPA -- After being barred by state regulators from seeking new business and losing its appeal in state court, Allstate Corp. agreed on Friday to settle its dispute with Florida regulators.
The insurance giant, which failed to comply with regulators' requests for rate-making documents, agreed to lower home insurance rates 5.6 percent across the state in the next 30 days. That's on top of a 14.2 percent rate reduction that took effect in June. Allstate also agreed to write 100,000 new homeowner policies over the next three years and will pay a $5 million fine.
"This is a good settlement for Florida consumers," said Ed Domansky, spokesman for the Office of Insurance Regulation. "The fact that a major insurance company is agreeing to write 100,000 new policies is significant."
Half of the 100,000 new policies will be written for condominium owners and renters. The rest will be written for homeowners.
Although a settlement has been reached, Insurance Commissioner Kevin McCarty said Friday that the state has not dropped its investigation into Allstate's relationships with reinsurers, rating organizations and trade associations. The state will continue looking into questionable claims-paying practices, which are detailed in a notorious Allstate document known as the McKinsey report.
Allstate said it can afford to write new homeowners policies thanks to a more competitive reinsurance market and the recent $12 billion expansion of the state's Hurricane Catastrophe Fund, a source of low-cost reinsurance for private insurers.
Reinsurance is backup coverage for insurance companies. The state's cat fund now provides private insurers up to $28 billion of reinsurance coverage, up from $16 billion.
Allstate is thus "in the position to be able to write some new homeowners, renters or condo insurance business with a lower risk," said Allstate spokeswoman Kathy Thomas.
State Farm Florida, the second-largest property insurer in Florida, requested an average 47 percent rate increase last month, citing higher reinsurance costs.
Allstate's settlement stems from a legal dispute over documents related to how the company sets rates.
After the company refused to turn over the requested documents, McCarty barred the company from writing new auto policies in an order issued in January.
Allstate appealed the decision, but the 1st District Court of Appeal in Tallahassee ruled in April that McCarty did not exceed his authority in suspending the company's licenses to write new business in Florida.
"It is unfortunate that Allstate's disregard of Florida law required the office to take the drastic actions that we did in order to bring Allstate into compliance," McCarty said in a statement. "However, the terms agreed to by Allstate in the consent order go a long way toward restoring confidence in Allstate's business practices."
Allstate has since turned over to the state 825,000 pages of documents related to its rate-making process.
Under the settlement, Allstate Floridian will not be required to pay back a $175 million loan from its parent company. Those funds have been deemed a capital contribution to the Florida company.
Reporter Russell Ray can be reached at rray@tampatrib.com or (813) 259-7870.
To see more of the Tampa Tribune or to subscribe to the newspaper, go to http://www.tampatrib.com.
Copyright (c) 2008, Tampa Tribune, Fla.
Distributed by McClatchy-Tribune Information Services.
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