Allstate Wants Back the $500 Million Consumers Saved Under California State Insurance Regulation
Washington, D.C. — Consumer advocates observed today that Allstate Insurance Company wants to take insurance regulation away from the states, as argued today by CEO Tom Davis in a New York Times opinion piece, because state regulators have successfully prevented the company from overcharging policyholders. Allstate was ordered to lower rates by $500 million for its California homeowners and auto insurance customers last year under strong state insurance regulations that prohibit excessive rates. Similarly, in Florida, Allstate has drawn aggressive regulatory oversight in response to the company’s anti-consumer practices.
Allstate’s desire to replace state oversight with federal regulation is a bait-and-switch, said the nonprofit Consumer Watchdog, that will weaken insurance regulation overall under the guise of federalizing oversight. For example, a federally regulated insurance company would be exempted from state rate regulation under legislation introduced last week in Congress by Rep. Bean (D-IL) and endorsed by Allstate on April 2, 2009. Bean has received at least $26,550 in campaign contributions from Allstate during the past four years.
"The Allstate CEO’s call for federal regulation of insurance is not an enlightened decision to change paths, but a cynical ploy to deregulate oversight of his company and industry," said Carmen Balber of Consumer Watchdog. "Insurance companies and their customers have been protected from the ravages of weak federal regulation exactly because of a state-based regulatory structure that puts insurers under more and stronger oversight. That is what Allstate wants to evade by calling for a single federal regulator."
Allstate homeowners’ insurance customers saved about $250 a year each with the order for the company to lower its premiums by 28.5%. Nearly 2 million motorists with Allstate auto insurance saw their premiums drop by an average $133 per car, or 15.9%.
In California, a ballot initiative approved by voters in 1988, Proposition 103, enacted the toughest state insurance regulation in the nation and has protected consumers from insurance company rate gouging, illegal surcharges and other abusive practices. The law has long been a target for insurance companies and their Congressional allies who are now using the financial crisis as cover to begin the process of federal preemption, said Consumer Watchdog.
An April 2008 state-by-state study of auto insurance regulation, by the Consumer Federation of America, found that California’s law limiting the rates insurers can charge has saved motorists $62 billion since Proposition 103’s passage. The report named California both one of the most competitive and one of the most profitable markets in the country, with the slowest-growing automobile insurance premiums in the nation. All these gains could be lost for consumers if insurers are able to opt out of strong state regulation for a lower federal standard, or if federal standards preempt state oversight entirely.
"Banks and other financial firms escaped regulatory scrutiny by changing their charters and choosing their regulator. Insurance companies shouldn’t be allowed to do the same and put Americans at risk of another meltdown," said Balber.
Download Consumer Watchdog letters on state insurance regulation:
Letter of February 11, 2009.
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