Allstate Mulls Reaction to Florida Auto Line Suspension

Jan 17, 2008

Allstate Mulls Reaction To Florida Auto Line Suspension

NU Online News Service, Jan. 16, 4:01 p.m. EST

Allstate is pondering its next move after Florida’s insurance commissioner announced he was suspending the insurer’s license to write new auto insurance business in the state until the carrier provides material he has demanded in a subpoena.

The action by Commissioner Kevin McCarty came in the midst of a dispute between the state and the insurer over what their rates for property insurance should be.

“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,” the company said.

Standard & Poor’s Ratings Services said the suspension will not affect the ratings on Allstate or its subsidiaries.

“Standard & Poor’s believes that the effects of the suspension are not sufficiently material to change the rating on [Allstate], but will continue to monitor the events as they relate to [Allstate] and its interactively-rated insurance companies doing business in the state,” the rating agency added.

In announcing that he was suspending the certificate of authority of Allstate Companies to write new insurance in Florida, Mr. McCarty said the order would not affect the insurer’s ability to write renewals of policies.

His announcement did not specify what forms of insurance were involved but his staff said it was just auto.

Mr. McCarty’s action follows his announcement that he was halting a two-day hearing that began on Tuesday in Tallahassee, because his subpoena for information at that proceeding was not being complied with to his satisfaction.

The commissioner has asked for information concerning Allstate’s reinsurance program, as well as its relationships with risk-modeling companies, rating organizations, and insurance trade associations.

The Reinsurance Association of America declined comment yesterday, although an official with another industry trade group said Mr. McCarty appeared to be “casting a wide net.”

State officials have been pushing insurers to lower rates since the legislature passed a measure providing carriers with discount reinsurance through the Florida Hurricane Catastrophe Fund.

“In view of Allstate’s ongoing, blatant disregard of our subpoenas, I have little choice but to take an action that will send a clear message about how seriously I am taking this issue. Suspending their certificate of authority to write new business in our state should make my point,” said Mr. McCarty.

“If Allstate is willing to pay $25,000 per day in fines to a Missouri Court for its ongoing failure to provide similar documents, it’s obvious to me that it will take more than a monetary sanction to get them to comply with our subpoenas,” he added.

Allstate said that while the carrier is facing fines of that amount in Missouri for contempt of court for failing to supply material demanded by a court in a civil lawsuit over claims-handling, those fines are being appealed and have not been enforced.

At issue in the Missouri case is a consultant’s report that reportedly counseled the insurer to handle all claims with a policy that would make it difficult for anyone to collect.

Mr. McCarty announced that Allstate, rather than providing the company documents he had asked for, had given the Office of Insurance Regulation “51 pages of objections to the subpoenas.”

Allstate, in a statement, repeated an assertion it made yesterday that 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.”

The company said also that it was “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. McCarty said the suspension applies to Allstate Insurance Company, Allstate Indemnity Company and Allstate Property and Casualty Company, and it only suspends the companies from writing new business in Florida.

He added that existing policyholders will not be affected. Allstate must continue to service them, and the companies must make all required statutory filings including, but not limited to, audited annual financial statements, quarterly financial statements and rate filings.

“The duration of the suspension is up to them,” commented Mr. McCarty. “It will be lifted when I am satisfied that we have received each and every document we need to properly investigate the important issues before us.”

He added that “it continues to trouble me that Allstate has not complied with our subpoenas and is not willing to explain to us their relationships with rating agencies, modeling companies and trade groups, and how these relationships might have influenced the huge rate increases they have requested. This clearly cannot be in the best interests of Florida consumers.”

OIR said this is the first time it has suspended a company for failure to “freely” provide documents as required by Florida law.

Allstate Floridian Indemnity and Allstate Floridian Insurance Company have requested rate increases of 28.3 percent and 41.9 percent, respectively. Encompass Floridian Indemnity requested a 38.4 percent increase, while Encompass Floridian Insurance Company requested a 39.7 percent increase.

A company spokesman said they had withdrawn an initial appeal after the rates were denied, and were seeking to reach an agreement with regulators.

This article updated Jan. 17 9:36 a.m.