Governor , OIR Announce Allstate Subpoenas; Imply Coincidental Rate Increases Are Collusion

In a press conference this afternoon, Florida Governor Charlie Crist and Insurance commissioner Kevin McCarty announced a detailed investigation into insurance industry practices via subpoenas issued to Allstate Insurance Company (“Allstate”) and its subsidiaries.  

After the Governor voiced disappointement that homeowners insurance rates have not dropped more significantly, he stated that he has significant reason to believe that insurance companies are violating Florida law.  In support of this assertion, the Governor highlighted an alleged $73 billion profit the insurance industry made last year and encouraged consumers to visit a Web site to shop for their insurance premiums: www.shopandcomparerates.com.

Commissioner McCarty explained that the Florida Office of Insurance Regulation (“OIR”) has subpoenaed Allstate and its Florida subsidiaries to provide documents and testimony about their relationships with reinsurers, rating organizations, modeling companies, and trade associations.

Both the Governor and Commissioner McCarty complimented Florida domestic homeowners insurance companies, and stated that OIR’s disappointment mainly lies with national insurance companies.

In response to a question inquiring about the intent of the subpoenas, Commissioner McCarty said that he had recently been in Washington DC discussing regulators’ increasing concern that the insurance industry is abusing policyholders.

Commissioner McCarty also stated that lawmakers may want to reexamine some ramifications of certain antitrust exemptions given to insurance companies. He indicated that a perception existed regarding elements of coincidental rate increases due to actions by rating agencies, catastrophe modelers, and reinsurers, and that there might also be a “thread of collusion” among such groups.

Commissioner McCarty stated that the OIR will give particular scrutiny to trade associations, calling trade associations the “keystone” to investigations regarding collusion.

Governor Crist issued a written statement regarding the issue, saying, “Many Florida homeowners have been disappointed that property insurance rates have not dropped more, and I, too, am disappointed.  We have significant reason to believe that some insurers are violating both the spirit and the letter of the law passed earlier this year and may not be passing savings along to the customer.  Instead, we have seen outrageous rate hike requests.
 
“The insurance industry is tenacious, but we are, too.  We will remain vigilant and will continue to hold the insurance industry’s feet to the fire.  Thanks to the good work of Senate President Ken Pruitt, House Speaker Marco Rubio and the Florida Legislature, we created significant insurance reform in Florida that gives Insurance Commissioner Kevin McCarty the tools he needs to hold property insurers accountable.  I applaud the Commissioner’s work to ensure insurance companies are responsible and bring rates down.”