Allstate Wants To Raise Rates In Order To Obtain 24% Profit
Santa Monica, CA — The non-profit Foundation for Taxpayer and Consumer Rights (FTCR) has challenged a 12.2% rate hike proposed by Allstate Insurance Company for its California homeowners policies. The proposed increase would yield Allstate an additional $99.7 million dollars statewide by hiking the rates of more than a million customers an average $92 each. Insurance Commissioner John Garamendi recently challenged Allstate‘s existing rates as excessive and, according to FTCR, a double-digit decrease by Allstate is warranted. Today the group called for a public hearing to review the price hike proposed by Allstate, which is California’s third largest homeowners insurer.
“After several years of declining losses and soaring profits, Allstate‘s customers deserve decreases, and instead Allstate wants to gouge them even more,” said FTCR attorney Pamela Pressley. “Based on our review of the company’s planned price hike, it is evident that not only is Allstate‘s proposal out of whack, the premiums they currently charge their customers need to be cut substantially.”
After reviewing the Allstate proposal, experts working with FTCR determined that the insurer’s plan runs afoul of several rules meant to keep prices fair and appropriate. Among other improprieties, FTCR petition states that Allstate:
-Has proposed taking an excessive (23.75%) underwriting profit, which does not include additional income Allstate will earn by investing policyholders’ premiums;
-Wants to illegally pass its reinsurance costs through to policyholders, which is not permitted; and
is using a projection of future losses that does not accurately reflect insurance trends.
FTCR is challenging the proposed hike under the rules of voter-approved Proposition 103. Under Prop 103, any member of the public can challenge any company’s current or requested rates as excessive, and the Commissioner must grant a hearing if the requested rate hike exceeds 7%.
Using Prop 103, FTCR has successfully challenged homeowners insurance rate increases in the past. For example, FTCR:
-Blocked a 9.5% rate hike by California Casualty Insurance Company in 2004, saving California homeowners policyholders $3.2 million;
-Blocked a proposed 21.3% proposed hike on 40,000 mobile home owners by State Farm in 2005, providing an average annual savings of $130 to these State Farm customers; and
-Forced Safeco to cut a proposed hike of its earthquake insurance rates by 56%, saving Safeco customers $5.3 million this past summer.
At the same time that Allstate is seeking a double-digit rate increase, State Farm and Safeco have requested homeowners insurance rate decreases of 10.6% and 20%, respectively. FTCR is currently reviewing those applications to determine whether larger decreases are warranted.
“Insurance companies will pick our pockets if we don’t guard ourselves,” said Douglas Heller, Executive Director of FTCR. “Fortunately, Californians have the protections of Prop 103 to ensure that when companies like Allstate try to jack up rates without justification, the public can step in to stop them.”
For more information about FTCR and Proposition 103, visit: https://consumerwatchdog.org/insurance.
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