Santa Monica, CA — Allstate will try to convince the Department of
Insurance to allow a 9.3% rate hike on its homeowners insurance
customers at a hearing next week. The nonprofit Foundation for Taxpayer
and Consumer Rights (FTCR) has challenged the proposal, under the rules
of the voter approved insurance reform measure Proposition 103. The
group will present evidence that Californians are already being gouged
by Allstate and that rates should instead go down about 30%. If FTCR
prevails, consumers will pay about $325 million less than the company
wants, for an average savings of about $336 per Allstate homeowners
"Last summer, Allstate turned its back on California when it
decided to stop selling new homeowner insurance policies in the state.
Now they want existing customers to shoulder an unjustifiable rate hike
to pad the company’s overflowing pockets," said FTCR Executive Director Douglas Heller. "The arrogance of Allstate’s outlandish request to jack up rates is only trumped by the company’s greed."
Under Proposition 103’s rules, Allstate is required to gain
the Insurance Commissioner’s approval prior to implementing any rate
changes. FTCR formally challenged Allstate’s original proposal more
than a year ago and starting on Monday January 14, 2008, consumer
advocates and experts will argue before a Department of Insurance judge
that Allstate should be required to lower rates by 30%. In its rate
hike request, Allstate has asked the Insurance Commissioner to grant a
special "variance" from the standard rate regulations on the grounds that the company faces deep financial hardship if it is required to follow the same rules imposed on other companies.
National Study Says Allstate, Other Insurers Reaped Record Profits in 2007 By Overpricing Policies and Underpaying Claims
A report released today by the Consumer Federation of America
concludes that the property/casualty insurance industry continued in
2007 to systematically overcharge consumers and reduce the value of
home and automobile insurance policies, leading to profits, reserves,
and surplus that are at or near record levels. The study estimates that
insurer overcharges over the last four years amount to an average of
$870 per household. Click here to download a copy of the detailed news release about the study.
The study estimates that insurers’ after-tax returns for 2007
are about $65 billion, just under the record level set in 2006. If
insurers release even a small part of their swollen reserves as
profits, final profits for 2007 will exceed those of 2006, according to
the report. Profits for the record years of 2004, 2005, 2006, and 2007
are estimated to be $253.1 billion. The loss and loss adjustment
expense (LAE) ratio (a key insurance statistic that indicates the value
of an insurance policy relative to the price) for 2007 is estimated to
be 66.7 percent, the second lowest in the 28 years studied.
The study singles out Allstate as one of the most aggressive
profiteers in recent year. The report points out that the company
reported a 23.7% return on equity for the year ending September 30,
2007, well above the Fortune 500 average. During the first three
quarters of 2007, Allstate repurchased $3 billion in company stock in
addition to a nearly $13 billion repurchase plan that concluded in
2006, according to the study.
The Allstate rate challenge hearing is scheduled to begin at 9am
on Monday January 14th at the San Francisco office of the California
Department of Insurance — 45 Fremont St., 22nd Floor.
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FTCR is California’s leading public interest watchdog. For more information, visit us on the web at www.ConsumerWatchdog.org.