The State Insurance Chief Settles with Allstate, Which Agrees Not to Oppose a 28.5% Homeowners’ Rate Cut.
California Insurance Commissioner Steve Poizner has quietly dropped an effort to seek refunds for Allstate Corp. policyholders who might have paid too much for their homeowners’ coverage in recent years. Critics immediately denounced his decision.
On July 10, Poizner announced that Allstate had been ordered to slash its homeowners’ rates by 28.5% for policies that begin or renew after July 30. But still pending, his office said at the time, was whether a refund would be ordered for previous years.
In an unannounced legal settlement July 31, Allstate agreed not to contest Poizner’s rate cut order. In return, the Republican commissioner agreed to "not take any action" based on allegations that Allstate previously charged rates that were excessively high.
Consumer advocates criticized the agreement. "Commissioner Poizner’s backroom deal with Allstate effectively pardoned them for past misdeeds," said Daniel Y. Zohar, a Los Angeles attorney who represented Consumer Watchdog, a Santa Monica advocacy group, in the rate case.
Poizner’s decision to avoid a confrontation with the state’s third-largest property insurer, which was not released by his office, contrasted with his tough public stance toward the company in May 2007.
"I am drawing a line in the sand," Poizner said at the time. "If I find that Allstate’s rates are excessive, refunds will occur. I will take clear and decisive action to protect consumers."
Poizner’s spokesman, Darrel Ng, saw it differently. He explained that the Department of Insurance conceded on the refund issue only after Allstate promised not to fight the commissioner’s July 10 rate-cut order.
"Insurance companies have a history of using any available tactic to delay rate cuts," Ng said. "The Allstate settlement guarantees in writing that Allstate will provide a $250-million rate cut to its policyholders immediately."
For its part, Allstate said it was "pleased to have successfully resolved this matter and agrees with the insurance commissioner that this settlement is in the best interest of California consumers."
Not all consumers, however, said they were happy with Poizner’s Allstate deal.
Eric Mankin, a Venice-based science writer, is angry that he got hit with the old, higher Allstate rates when he renewed his homeowner’s policy in June.
If the rates were excessive, why weren’t they retroactive?" he wondered. "As an Allstate consumer, I feel left out by the current state of things."
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