Allstate Admits it has Dirty Hands
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Allstate the "good hands" people have decided to forgo hundreds of millions of dollars in profits rather than show their "dirty hands" to Floridians. Florida Insurance Commissioner Kevin McCarty announced on Friday that Allstate Corp. will give it's existing Florida policyholders an additional 5.6% rate cut, forgive a $175 million dollar loan, and pay a $5 million dollar fine to the State of Florida rather than produce rate-related documents regulators had demanded.
This interesting settlement was only agreed to by Allstate after the Florida Insurance Commissioner suspended Allstate from writing new policies in Florida . The agreement resolves McCarty's legal action that accused Allstate of failing to produce rate-related documents, falsely claiming that the material requested contained trade secrets, and falsely certifying a request to raise rates by more than 40%.
Allstate has long had a reputation among consumer advocate groups for their policy of increasing premiums while reducing payouts to customers when they have a legitimate loss, thus increasing their overall profits. Apparently the State of Florida felt Allstate was trying to fleece it's policyholder's when it requested a rate increase after the State implemented a new program to reduce the exposure of all insurance companies in Florida that write homeowner's insurance policies. That program was designed to allow insurance companies to reduce rates after a rash of hurricanes in 2004 and 2005 had caused skyrocketing increases in premiums.
Allstate was facing an upcoming court hearing to determine whether it had to produce these internal documents that would have disclosed how they evaluated their requests for increases in premiums from consumers. That hearing has been canceled as part of this settlement. Allstate must have been concerned about the public outcry that would have resulted from the release of these rate-related documents.
Allstate will continue to be investigated for other violations of state law regarding claims handling and potential collusion with rating organizations, trade associations, and other entities. The company could still face further fines, suspension or revocation of it's license to do business in Florida. Allstate spokeswoman Kathy Thomas said the settlement was in the best interests of Allstate, its agents and customers. Many Allstate agents were losing huge profits when the State suspended Allstate from writing new policies in May.
It is encouraging to see our Insurance Commissioner finally ask the same questions consumers have been asking for years "Why are they raising our rates?" Apparently the answer to that questions was simple: "To make more money" The consumer is getting squeezed by the rich and powerful oil companies and now the insurance industry. Both have something in common: we need gas for our cars and we need insurance for our homes and cars.. Finally Florida has a watchdog in Kevin McCarty, at least' as far as insurance companies go. Maybe the State can find a watchdog for the oil companies as well.