The state-ordered reduction will save more than 850,000 customers about $250 each.

SACRAMENTO, CA — The rate reduction, to be announced this morning in Los Angeles by state Insurance Commissioner Steve Poizner, marks the end of a battle of more than two years between state regulators and Allstate. The company covers about 1 in 7 homes, condominiums and rental units insured in
California.

Poizner’s legal order, signed Tuesday, rejects
Allstate’s request for a 9.3% increase in its homeowners insurance
rates, and, instead, instructs the company to reduce its existing
premiums by 28.5%. "In today’s sputtering economic environment, people
need all the help they can get just to pay the bills," Poizner said.
"That’s why I’m pleased to order this tremendous rate cut."

According
to the Department of Insurance, the reduction should drop average
Allstate premiums to around $600 a year. The new rates will take effect
July 28.

The insurer will comply with the commissioner’s order,
Allstate spokesman Peter DeMarco said. "We are reviewing the order in
detail and communicating with the department about the process for
adjusting the rates of our 850,000 homeowners policyholders in the
state."

In May 2007, Northbrook, Ill.-based Allstate announced
that it would no longer issue new homeowners insurance policies in
California. The company contended that it needed to better manage the
risk of potential losses related to wildfires and blazes caused by
earthquakes.

In
the wake of Hurricanes Katrina and Rita in 2005, Allstate had stopped
writing new policies in all or parts of 15 hurricane-prone states,
covering most of the Gulf and Atlantic coasts.

Poizner’s order
reducing Allstate’s homeowner rates is the insurer’s second setback in
recent months with California regulators. In March, Poizner told
Allstate to cut automobile insurance rates 15.9%, saving policyholders
an average of $124 per car. Allstate fought the decision in Superior
Court but later dropped its appeal.

The push to lower Allstate’s
homeowner premiums began in mid-2006 when then-Insurance Commissioner
John Garamendi ordered Allstate and several other companies to show
that their rates were not excessive.

Proposition 103, an
initiative approved by voters in 1988, gives the state’s elected
insurance commissioner broad powers to set companies’ rates, ensuring
that they are not "excessive, inadequate or unfairly discriminatory."

Three
of the insurers soon agreed to lower rates. No. 1 State Farm Mutual
slashed its premiums 20%, and those at second-place Farmers Insurance
Group fell 18%. The third firm, Safeco Corp., cut its homeowner
premiums 20%.

Garamendi, the state’s lieutenant governor, said he was pleased that Allstate finally was cutting its rates.

"The
company has pocketed far more of the policyholders’ money than was
warranted," he said. "But, frankly, they must in my view provide a
rebate for the three years in which they charged an illegal amount."

The
question of whether Allstate might have to refund past premiums is
pending in a separate legal proceeding, said Darrel Ng, a Poizner
spokesman.

Allstate should comply quickly with Poizner’s order
so that proceedings on the rebate issue can get underway, said attorney
Pamela Pressley, who represented Santa Monica-based Consumer Watchdog
in the Allstate case before an administrative law judge. A predecessor
of the activist group wrote Proposition 103 two decades ago.

"This is a heck of a decrease. It’s huge," Pressley said. "It’s been a long time coming."

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