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Old 07-10-2008, 05:36 PM
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douglan douglan is offline
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Default California orders Allstate to cut homeowner rates

IANAPCA, but I thought this was an interesting read. Do state insurance commissioners generally have this much power? Or is this a California thing?

http://uk.reuters.com/article/govern...47632920080710

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HAMILTON, Bermuda, July 10 (Reuters) - U.S. insurer Allstate Corp (ALL.N: Quote, Profile, Research) will have to lower their rates on California homeowner policies by 28.5 percent making an estimated $255 million in annual savings for consumers, the state's insurance commissioner said on Thursday.

"In today's sputtering economic environment, people need all the help they can get just to pay the bills," Insurance Commissioner Steve Poizner said in a statement.

Allstate spokesman Peter DeMarco, in a statement, said the company was "disappointed" in the order but planned to comply.

Northbrook, Illinois-based Allstate had initially filed for a 9.3 percent increase in homeowners insurance rates, according to Poizner's statement.

He ordered the rate reduction after an administrative judge recommended the cut. Consumers will save an average of $242 per policy on an annual basis, according to the statement.

The rate order follows one earlier this year, forcing Allstate to cut its auto policy rates in California by 15.9 percent.

Allstate is the largest publicly traded U.S. insurer of homes and autos.
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Old 07-10-2008, 06:16 PM
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ugh.
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Old 07-10-2008, 07:08 PM
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Quote:
Originally Posted by douglan View Post
IANAPCA, but I thought this was an interesting read. Do state insurance commissioners generally have this much power? Or is this a California thing?

http://uk.reuters.com/article/govern...47632920080710
In law? Certainly not. In practice? Insurance Commissioners are almost infallible, due to (1) the ambiguity of the powers of the Commissioner and (2) the reticence of insurers to fight back. In California, the Commissioner is rarely challenged and even far more rarely reversed. This is why a chairman of my last company said in the early 1990s:
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There are two places where we will never do business:California and Iraq.
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Old 07-10-2008, 08:06 PM
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Did he give the reason why he asked Allstate to lower their rates? I didn't expect the Commissioner to have such power. It's a little bit scary.
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Old 07-10-2008, 08:12 PM
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Did he give the reason why he asked Allstate to lower their rates?
Insurance companies are 100% evil is why.
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Old 07-10-2008, 09:56 PM
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Did he give the reason why he asked Allstate to lower their rates? I didn't expect the Commissioner to have such power. It's a little bit scary.

"In today's sputtering economic environment, people need all the help they can get just to pay the bills," Insurance Commissioner Steve Poizner said in a statement.
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Old 07-10-2008, 10:03 PM
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For crying out loud.

What does the Honorable Steve Poizner think we're doing when we're busting our asses doing rate level indications and preparing filings all day? He thinks we enjoy all that stuff, that we do it for fun??


He's probably gunning for some elected position, which is why he's pulling this crap.

Last edited by atomic; 07-10-2008 at 10:53 PM..
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Old 07-11-2008, 08:56 AM
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I think the real issue was that Allstate was not able to support the variances it requested in the original filing. California has very explicite rules regarding rating. If you want to deviate from these rules you have to be able to support the variances you are claiming.

In one case, they wanted a credit for investing in underserved areas of CA. Allstate evidently has made an effort to do so. The trouble is that they had already taken credit for the money spent on that program with their previously approved auto rate change. So essentially the courts decided they were double dipping by requesting the same variance on the homeowner side.

I'm not sure what the other variances they requested were, but I think that all of them were withdrawn and only the underserved communities variance was litigated.

As Brad mentioned above, California is a tough place to do business. They have very specific rules and they strictly enforce them. If you don't want the hassle assoicated with following them it's better to do business elsewhere.
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Old 07-11-2008, 11:26 AM
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I think the real issue was that Allstate was not able to support the variances it requested in the original filing. California has very explicite rules regarding rating. If you want to deviate from these rules you have to be able to support the variances you are claiming. In one case, they wanted a credit for investing in underserved areas of CA. Allstate evidently has made an effort to do so. The trouble is that they had already taken credit for the money spent on that program with their previously approved auto rate change. So essentially the courts decided they were double dipping by requesting the same variance on the homeowner side.

I'm not sure what the other variances they requested were, but I think that all of them were withdrawn and only the underserved communities variance was litigated.

As Brad mentioned above, California is a tough place to do business. They have very specific rules and they strictly enforce them. If you don't want the hassle assoicated with following them it's better to do business elsewhere.
I am not familiar with All-States filing and what variances they tried to request so I can't comment on that, however, I work for an Auto Insurer and last year we submitted a filing WITH NO variances and followed the California filing template to the letter and requested a 2% decrease. This request was within the range of the templates output and we expected no issues with the filing. The DOI came back and requested that we take a 10% decrease! We came back with another rate indication with an additional 4 months of data as time had passed since the filing was first submitted. The data showed again that 2% was a very reseasonable request but we decided to follow the request of the "ALL MIGHTY COMMISH" and offered to take a reduction of 8%... There response was, "In light of the new submitted rate indications we now request that you take rates down 18%." 18%!!!!! 4 additional months of data suddenly made them feel they could demand an additional 8 percent reduction.
That is California for you! The DOI will do what it can to make it as cheap as possible for consumers even if it puts the insurer at risk.

Just FYI... after the rate change we had agents calling us to verify that the rates that were quoted through the web were indeed correct as they seemed too low to be reasonable. Our daily application count QUADRUPILED and our earned exposures are now double what they were 9 months ago. Our Loss Ratio has also increased significantly.

If the DOI was an insurer it wouldn't take long for them to become insolvent.
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Old 07-11-2008, 11:42 AM
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Does the DOI have the power to do this? In a prior approval state, sure they do. You can try to appeal a ruling in the courts, but that usually won't get you much. Even in a file and use state, theoretically they could disapprove something and force the insurer to justify their rates, but the couldn't prevent you from using the filed rates until they said no, and practically speaking, file and use states have little interest in doing it, since they are believers in market forces. They just keep an out in case of egregious behavior on the insurers part. (And often have a regulation to the effect that if the market collapses, rates revert to prior approval for the remaining companies who might have monopoly power.)
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