The Wall Street Journal-20080117-Florida-s Allstate Fight Intensifies- Sale of New Policies For Auto Insurance Suspended by State
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Florida's Allstate Fight Intensifies; Sale of New Policies For Auto Insurance Suspended by State
Florida's insurance commissioner took the unusual step yesterday of suspending Allstate Corp.'s license to sell car insurance in the state, in retaliation for its alleged failure to fully respond to a subpoena for information about homeowner insurance.
The regulator's action means that Allstate's subsidiaries can't sell any new auto policies there until the commissioner decides to lift the ban.
The move is the latest step in a continuing backlash by regulators and consumer groups in coastal states against property insurers' raising homeowner insurance premiums and dropping policies. The insurers acted after the hurricane seasons of 2004 and 2005, citing higher reinsurance costs and industry projections of greater hurricane activity in the Atlantic.
Some regulators and consumer advocates have charged that insurance companies are enjoying excessive profits at homeowners' expense, but insurers contend that they need to raise premiums and lower their exposure to guarantee financial solvency in the face of greater risk from catastrophes.
The suspension applies to Allstate Insurance Co., Allstate Indemnity Co. and Allstate Property and Casualty Co., three Allstate subsidiaries operating in the state. The companies mostly provide auto insurance, because Allstate has been withdrawing from homeowner insurance in Florida since 2004. Allstate has 241,000 homeowner policies in the state, down from 576,000 in 2004, but it insures 1.7 million cars there. The action means that Allstate must continue to service its current auto policies but can't issue new ones.
The Florida Office of Insurance Regulation confirmed yesterday that the suspension applies only to new car-insurance policies.
Commissioner Kevin McCarty suspended Allstate's license after he said the insurer failed to fully comply with a subpoena issued by his office in October demanding the company provide information about its communications with insurance trade groups, risk modelers and ratings agencies in connection with a request for homeowner insurance premium increases of as much as 42%.
Mr. McCarty abruptly ended hearings scheduled Tuesday at the state capital in Tallahassee after the insurer balked at answering some questions and didn't produce all the documents he requested.
"We are going to hit them where it hurts," Mr. McCarty said yesterday. The suspension will stay in effect until Allstate complies with the subpoena, he said.
An Allstate spokesman countered that the company believes that it did comply with the subpoena. The spokesman, Adam Shores, said the company had requested more time to assemble all the information demanded by the Office of Insurance Regulation. He said the company was "considering its options" but he didn't say whether they would include legal action. He said Allstate hadn't received the order from the commissioner yet, and wasn't sure how it would affect their nearly two million customers or the 1,100 Allstate agents in Florida.
"We were surprised at the OIR's actions yesterday and today based on our dealings with them over the course of several months and dozens of phone conversations, " Mr. Shores said in a statement released yesterday. He also said that Allstate has produced nearly 40,000 pages of information and would continue to provide documents to the OIR.
The insurance affordability and availability crisis has become acute in Florida, where a severe downturn in real-estate values has also hurt property owners. Florida regulators are angry the state's expansion of its catastrophe fund -- with taxpayers essentially pledging to bail out insurers if their losses exceed their reserves -- has failed to produce the expected savings for homeowners on their property insurance bills.
Mr. McCarty has hinted in the past that he wouldn't allow insurers to continue writing automobile insurance in the state if they withdrew from the home insurance market. "They can't remove themselves from homeowners and keep their most profitable line," said spokesman Ed Domansky at the Office of Insurance Regulation.
Florida regulators said Allstate has been expanding its car insurance business in the state even as it was unloading the riskier homeowner insurance lines. Allstate's written auto premium rose $200 million, to $1.9 billion in 2006 from $1.7 billion in 2004, even as it shed more than half of its homeowner policies in the state during the same period.
