Enough is enough

Jan 17, 2008

Enough is enough

State insurance regulators and lawmakers are sticking up for Florida consumers, who are long overdue for a break. Insurance Commissioner Kevin McCarty’s slap at Allstate on Wednesday was an appropriate response to the insurer’s lack of cooperation. Regulators and consumers deserve to know why some insurers want to raise rates after participating in a state program that should have lowered, not raised, premiums.

Soaring rates

Mr. McCarty has barred Allstate from selling any new insurance policies in the state until it complies fully with a subpoena for specific documents. Being cut off from the lucrative auto-insurance market could hurt Allstate, Florida’s second-largest auto insurer, but Floridians have also been hurt by soaring property-insurance rates.

Last year, state legislators made a good-faith effort to reduce insurance rates. Insurers complained that their reinsurance costs had skyrocketed after a slew of hurricanes in 2004 and 2005. So the Legislature expanded the state’s catastrophe fund, assuming more risk, to offer insurers cheaper back-up insurance. Insurers were required to pass the saving on to policyholders. Indeed, some insurers did: 32 companies have lowered rates by an average 22 percent.

Allstate initially indicated it would reduce rates, too, by 14 percent. Then it filed a request to hike rates an astounding 42 percent. Regulators want to know what justifies such a large increase.

The request outraged policyholders, lawmakers and regulators — and rightly so. It raised troubling questions about Allstate’s reinsurance program, its dealings with insurance-rating agencies and its relationships with companies that create computer models to predict hurricane risk and losses. Was Allstate acting in good faith?

Those questions prompted Commissioner McCarty to subpoena Allstate. The insurer had three months to provide all the documents requested. Instead, at a Tuesday hearing, executives provided excuses: the desired documents contained trade secrets or were irrelevant.

Act in good faith

Commissioner McCarty didn’t buy it. Allstate executives wouldn’t even explain how they decided which documents to hold back. That only raises more questions. What does Allstate have to hide?

Negotiations between regulators and businesses can yield better results when all parties cooperate and act in good faith. There has been precious little of either from insurance companies, however; and it’s about time regulators called them on it. Enough is enough. Rate-weary insurance consumers have been saying that for years. Now, Florida lawmakers have joined them.