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Allstate settles with Department of Insurance

by Will Lutz

Tue, May 13, 2008, 01:44 PM

The Texas Department of Insurance and the Office of Public Insurance Counsel announced today that they have reached a settlement with Allstate Insurance in the company's litigation with the state. Allstate will pay $36.8 million in refunds to customers who held policies from Dec. 1, 2004 to Apr. 23, 2006. These refunds will be mailed by Nov. 2008. This is a period where the Department of Insurance believed Allstate was charging a rate it deemed excessive. The department had ordered a 5 percent rate cut, which would have worked out to $47.1 million in refunds. The agreement grants $36.8 million in refunds. The rate order was pending before the 3rd Court of Appeals.

Additionally, Allstate had filed for a 5.9 percent average premium increase in Aug. 2007. That filing was rejected by Commissioner of Insurance Mike Geeslin, but Allstate appealled, and the filing was pending before the State Office of Administrative Hearings. The courts allowed Allstate to use the higher rate while it was under appeal. Allstate agreed to reduce that higher rate by an average of 3 percent with regional variations, retroactive to Aug. 2007. This second reduction will be issued as a credit to existing Allstate customers and as a refund to former Allstate customers. Allstate agrees not to raise rates until June 1, 2009 barring extraordinary and unforeseen circumstances. Allstate is also released from the requirement to obtain prior approval before increasing rates in the future. (Allstate had been placed under prior approval by the commissioner, which is a penalty the commissioner can levy against companies believed to have excessive rates.)

"This agreement is a positive step for the Texas market and provides rate reductions and refunds for a substantial number of Allstate policy holders in Texas," said Commissioner of Insurance Mike Geeslin.

Allstate said that it's new Texas Lloyds rates will be 5.7 percent less on average than they were five years ago. “This agreement takes Allstate and the Texas Department of Insurance out of the courthouse, ending burdensome, costly litigation in a positive way for our customers,” said Allstate’s Texas Field Vice President Rich Crist. “It allows Allstate to focus even more directly on what’s important - providing quality, innovative insurance products and great service to our customers.”
“This agreement with the Texas Department of Insurance helps create clarity and consistency in how we work together," Crist added. "We’re hopeful it will help the ongoing development of a more competitive marketplace, which benefits consumers.”

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