Florida Insurance Commissioner Suspends Allstate Insurance Co.

Here is the text of the press release just issued by the Florida Office of Insurance Regulation.

Wednesday, January 16, 2008

TALLAHASSEE, Fla. – Florida Insurance Commissioner Kevin McCarty today announced that he is suspending the certificate of authority of Allstate Companies to write new insurance in Florida until they fully comply with the subpoenas served Oct. 16 by the Office of Insurance Regulation (Office).

Today’s decision by the commissioner follows Tuesday’s action when he abruptly halted the scheduled two-day hearing into the Allstate Companies’ reinsurance program, their relationships with risk modeling companies, insurance rating organizations and insurance trade associations.
“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,” said Commissioner McCarty. “Suspending their certificate of authority to write new business in our state should make my point.

“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.”

Allstate was to have provided all appropriate company documents related to the above topics at or before Tuesday’s hearing, but failed to do so. Instead, the Office received 51 pages of objections to the subpoenas.

The suspension applies to Allstate Insurance Co., Allstate Indemnity Co. and Allstate Property and Casualty Co., and it only suspends the companies from writing new business in Florida.

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,” added 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.

“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.”

This is the first time the Office has suspended a company for failure to “freely” provide documents as required by Florida law.

A copy of the subpoena is available to review.

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, and Encompass Floridian Insurance Company requested a 39.7 percent increase.

About the Florida Office of Insurance RegulationThe Florida Office of Insurance Regulation (Office) has primary responsibility for regulation, compliance and enforcement of statutes related to the business of insurance and the monitoring of industry markets. Business units within the Office are organized based on regulatory expertise and include the areas of life and health, property and casualty, specialty lines and other regulated insurance entities. It is within the Office that the mission of public protection is implemented through regulatory oversight of insurance company solvency, policy forms and rates, market conduct performance and new company entrants to the Florida market.

Allstate facing Florida Sanctions: “The Dance is Over”

Well folks, here in Mississippi our politicians kowtow to crooks in Gucci suits and let State Farm pull out of the homeowners market yet continue their lucrative business lines in Auto Insurance. The difference in Florida is huge as the GOP leadership down there must not be on the insurance payroll. In fact them boys actually put the interest of the people ahead of the big campaign contributions big insurance gives it’s faithful waterboys. For Allstate today is the day of reckoning over Tallahassee way and the betting money is them crooks are gonna be shown the door, just like we should have done State Farm after they pulled out of the homeowners market. (Edited by Sop – This problem with our politicians transcends political party here in Mississippi.)

State insurance regulators cut short a two-day public hearing when Allstate executives failed to provide detailed answers to their inquires and failed to produce all subpoenaed documents.

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There was some sizzle, but Florida insurance regulators cut short a two-day public grilling of Allstate company officials when they failed to provide specific documents and answers.

Frustration was high for the regulators since Allstate Floridian and several sister companies had three months to comply with subpoenas for documents and prepare for Tuesday’s hearing.

”To say we have come with a contrite heart and say some day in the future we’ll negotiate simply isn’t satisfactory,” said Insurance Commissioner Kevin McCarty, who called off the hearing after just two hours.

McCarty noted the insurer did have time to file a 51-page objection to the subpoena issued by the Office of Insurance Regulation.

Steve Parton, OIR’s general counsel, said Allstate’s objection asserted that most of the 59 areas where the agency sought documents and information were considered trade secrets by the company and thus couldn’t be turned over to regulators.

During the hearing, George Grawe, Allstate Floridian’s general counsel, complained repeatedly that OIR’s subpoena was “breathtakingingly broad.”

McCarty said many of the documents provided by Allstate already were public because they had been included in rate filings.

Gov. Charlie Crist, who has made lowering insurance rates one of his mantras in the past year, was taken aback by Allstate’s behavior at the hearing.

”I find it stunningly arrogant and I can’t believe they would actually do that and if there’s anything we can do from the governor’s office that can help . . . we stand at the ready to do,” Crist said.

Regulators and lawmakers have been eager to question Allstate because they want to know why the company failed to comply with a new insurance law passed last year.

That bill expanded the Florida Hurricane Catastrophe Fund to give insurers access to cheaper back-up insurance, even though the state would be shouldering big losses if another massive hurricane hits the state. Then, insurance companies were to apply the savings to lower rates.

Allstate initially indicated it would drop rates. But last fall, the company filed for a massive rate hike averaging nearly 42 percent.

”This dance is over,” said State Sen. Jeff Atwater, R-North Palm Beach, who sat through the hearing Tuesday morning and was clearly disturbed by Allstate’s refusal to provide detailed answers to just about every question posed by OIR.

Both McCarty and Atwater asked if Allstate’s intent was to limit the scope of OIR’s investigation by selectively producing documents and the witnesses it brought to the hearing.

During Tuesday’s hearing, Grawe pointed out that Allstate provided OIR with 30,000 pages of documentation so far and would continue turning over documents. But neither Grawe nor the two other company officials and its outside attorney would answer questions from the OIR panel on how Allstate decided which documents to turn over and which ones to withhold.

”Consumers are going to get relief and they will also get justice,” Atwater added. The senator will be chairing a joint Senate committee that will also investigate why many insurers haven’t complied with the new law and lower their rates.

Tuesday’s unprecedented inquiry was meant to examine Allstate’s reinsurance program and how it deals with agencies that rate its financial strength and the companies that have developed sophisticated computer models to help gauge exposure to future losses.

Though the OIR hearing was postponed for now, the heat on Allstate — and the industry — hasn’t been turned off.

McCarty said he will call Allstate back to testify — and hopefully get more information.

But given Allstate’s track record in Florida and other states, he wasn’t too optimistic. That leaves the insurance commissioner to consider what remedies OIR can take to compel Allstate to meet the state statute. One possibility: fines of $10,000 a day until the company delivers the documents and information the OIR is seeking. The ultimate sanction would be to revoke Allstate’s license to sell insurance in Florida.

OIR also is holding a news conference Wednesday morning to discuss an important property insurance issue. No other details were released.

The joint Senate committee, meanwhile, issued a list with its first witnesses for hearings on Feb. 4 and 5: Nationwide Insurance, Hartford Insurance, American Strategic Insurance, Florida Farm Bureau — and Allstate.

Rep. Dan Gelber, D-Miami Beach, called for hearings in the Florida House as well.

”I am also extremely concerned that the clock will run out on any savings because the enhanced reinsurance capacity of the CAT fund will soon expire,” said Gelber, noting that the expansion of the state CAT fund was set up for one year.

Breaking News: Allstate Stonewalls Florida Insurance Regulators (Updated)

What a day folks and now we have breaking news. Allstate has been less than forthcoming with insurance regulators and them boys are hoppin’ mad over Tallahassee way. First the AP news story and a copy of the subpeona Allstate saw fit to ignore.

Fla. Regulators Cut Off Allstate HearingTuesday
January 15, 4:45 pm ET
By Brent Kallestad, Associated Press Writer

Florida: Frustrated at Allstate, Regulators Shorten Insurance Hearing

TALLAHASSEE, Fla. (AP) — Florida insurance regulators angrily and abruptly ended a hearing with Allstate executives Tuesday, upset that the company and its attorneys failed to fully comply with a subpoena demanding information on property coverage rates.

The hearing was scheduled to last two days but state officials cut it short after just two hours during which company officials and lawyers were badgered by regulators about why they hadn’t supplied all the documents the state wants, and whether they are following a new law meant to lower premiums.

Insurance Commissioner Kevin McCarty said he planned to bring the Illinois-based insurance giant back later this year when it has answers to the state’s questions.

McCarty said the company faces severe sanctions, including the possibility of losing its license to operate its four Florida companies if it fails to comply again.

“We will take appropriate enforcement actions,” McCarty said. “Their certificates are certainly under review.”

Allstate’s response to some requests as “irrelevant” was “a slap in the face to the regulatory agency,” McCarty said.

Allstate’s legal team and company executives, who were under oath, largely avoided questions about whether it has complied with a Florida law passed last year to give consumers premium relief. That infuriated McCarty.

“What have you got to hide?” McCarty asked as the hearing opened.

Regulators were looking for information on Allstate’s relationships with insurance rating and risk monitoring companies and insurance trade associations.

The panel focused on a new hurricane model that Allstate began using to calculate its rates after Florida lawmakers passed new insurance legislation in January 2007. Under the new model, rates went up, although the company said that wasn’t its intent. That model wasn’t approved by the state.

At one point before taking a 10-minute break halfway through the testy testimony, McCarty laughed aloud at the response to one of the committee’s questions.

“Clearly they’re frustrated with the situation,” Allstate spokesman Adam Shores said. “And we’re frustrated too. We want to have an open and active dialogue to work this thing out.”

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

While Allstate told McCarty it planned to drop its request for double-digit rate increases, that did little to assuage him or Sen. Jeff Atwater, R-North Palm Beach. Atwater is chairman of a newly created Senate panel investigating why so few companies have complied with the insurance law.

Atwater wasted little time inviting five insurance executives, including Joseph Richardson, Allstate Floridian Indemnity’s chief executive officer, to testify under oath at a Senate hearing Feb. 4-5.

House Democrats also want in the act.

Rep. Dan Gelber, the Democratic leader from Miami Beach, asked Rep. Ron Reagan, R-Bradenton, to schedule hearings and put insurance executives under oath to find out what’s causing the delays.

“The Florida House should not foster the perception that we are a ‘safe house’ for insurers,” Gelber wrote in his letter to the House insurance committee chair. “We have done very little to prove otherwise.”

Update: the Florida Office of Insurance Regulation has scheduled a news conference for tomorrow morning. Rumors are swirlin’ that Allstate will be kicked out of the State!