Florida suspends Allstate's insurance license

[mobilus]

State suspends Allstate's insurance license

State suspends Allstate's insurance license
Wednesday, January 16, 2008

TALLAHASSEE (Bay News 9) -- The state of Florida has suspended Allstate's Insurance license.

The move, which became effective Wednesday afternoon, bars the company from writing new policies in Florida. On Tuesday, Florida Insurance Commissioner Kevin McCarty abruptly adjourned a rare two-day hearing on Allstate's underwriting practices in Florida after three hours of sometimes heated exchanges.

The second largest property insurer in the state, Allstate had requested a 42 percent rate hike. Not only was that denied, but the insurance commission called the hearing to question how the company establishes rates. McCarty accused the company of sending regulators a 51-page objection to the subpoenas, while also sending more than 30,000 documents that included little or nothing of value.

Allstate officials said they were apprehensive about handing over certain documents like hurricane risk models and internal memos, calling them trade secrets.

"Either you're going to produce the documents we request or you're not,' said Florida Insurance Commissioner Kevin McCarty. "And if you're not, we will use all means available under Florida law to enforce our authority over our subpoenas." In a statement, Allstate said it was surprised at the state's Office of Insurance Regulation (OIR) rulings based on several months of phone conversations.

"Allstate is committed to working diligently with the Office of Insurance Regulation to create solutions and ensure there is a healthy insurance market for Florida consumers," the statement said. "Since receiving the subpoenas, Allstate has produced nearly 40,000 pages of information and will continue to produce responsive documents to the OIR on a rolling basis.

"We have not yet received an order and are evaluating our options. At this time, it is not clear how this action will affect Allstate or the more than 1,100 Allstate agents in Florida who are small business owners and employers." *

No date was set for the hearing to resume.

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Allstate surprised by Florida ban

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This state ban apparently includes both home owner and motor vehicle policies. Allstate was asking the State for permission to hike rates by 42%.

We're not in Florida, but I'm posting this because it has a ring of familiarity to it. I had a running disagreement with Gldwngr (RIP?) about this a year ago. I'm not in the insurance business, so if I'm wrong, I'm open to being corrected. Here's how I understand it... imagine I'm the ABC Insurance Company, and I've written a mix of auto/home policies worth $100 million. To do so, I need assets in equal value to the policies written, to act as collateral (satisfying the government) that I can pay out the amounts I insure. Potentially, if every car I insured were stolen and every house burned to the ground, I would need to have the assets to cover everyone's maximum coverage.

As the ABC Insurance Company though, I don't expect every car to be stolen and every house to burn down all in the same year. So I take a good chunk of my $100 million in assets and invest it in bonds and stocks. The government regulates my rates. I can only raise them with their permission. In return for that, the government also guarantees me a set profit margin. If I fall behind in profits, I can apply for a rate increase. I may have a year when a high number of auto and home claims brings down my profits. So your rates will be going up next year. Likewise, I may have a year with little in the way of policy claims, but I take a big loss in the stock market with my collateral. Hence, my profits are down, and I apply to the government for a rate hike. Your insurance rates are not just influenced by claims made to my company.

For Allstate to ask for a 42% increase, something must be terribly wrong. There's bad news everywhere about the mortgage market and subprime market imploding in the U.S. The perfect storm scenario is that the credit/debt crisis in the States leads to a monster recession/depression. Portfolios could easily be cut in half, or worse. If Allstate's problems are linked to Wall Street, then we're not far behind in Canada, no matter who you're insured with. All insurance companies play this game, so none of us are immune from the fallout.

[montag]

Allstate was being really aggressive for their ad campaigns , zero deductibles, accident forgiveness, may with some bad investments and a high loss ratio they bit off way more than they can chew. Be interesting to see if they try to do the same thing in any other states\ provinces

[bear22099]

Perhaps you need to look at the weather related claims in Florida for the last few years. How many times can they afford to pay for the same house?

[Red1]

The Subprime mortgages are mainly a US epidemic. Not so much in Canada...yet. This is all cause and effect in the US. The lenders offer mortgages and any other type of loans to people that can't afford them just to be greedy and take on as much business as possible. They default on the mortgage/ loan and the lender just writes it off causing interest rates to rise higher. I agree with the prediction that the US is going to hit a depression. But it is a self inflicted depression that could have been prevented if proper regulations on lending were implemented.

The sad thing is that it will affect Canada also because we are joined at the hip with them in terms of investments. I guess Bush is leaving office at the ideal time so he does not have to deal with solutions to get out of the impending depression.

[Angelwings]

FYI: StateFarm's Position....

State Farm® spokesman Chris Neal told the media it was not appropriate for us to comment on Allstate’s situation. He stressed that State Farm has complied with HB 1A, a measure passed by the Florida Legislature last year to provide some relief to the industry with an eye toward lowering premiums.
Overall, State Farm has reduced rates for homeowners by 9 percent in Florida, and we have complied with all requests from the state’s Office of Insurance Regulation.

In Canada we would not be effected by this.