Florida insurers used loophole in law to bypass required rate savings

[seafan]

Lovely. Just lovely.

Who was the judge who sided with Allstate in their refusal to turn over documents to the state investigators? Would it be one of Jeb!'s operatives? The newspapers pointedly omitted this judge's name in their reports.

This is just another slap in the face to Floridians who are being robbed blind by insurance companies.



Florida insurers used loophole in law to bypass required rate savings

By Julie Patel
February 6, 2008

It appears some of the state's biggest insurers tried to use loopholes in a law to skirt a requirement that they pass savings from a state-backed financial safety net to homeowners.
That's one of the conclusions drawn Tuesday after two days of Senate hearings on compliance with a law passed last year to quell Florida's property insurance crisis.

Executives from insurance companies testified under oath about why they didn't reduce prices for consumers, as the Legislature demanded last year in exchange for offering insurers cheaper backup storm coverage.

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In one such gap, the law didn't explicitly indicate methods insurers can't use to predict risk and ultimately set insurance policy prices, said Sen. Steve Geller, D-Hallandale Beach.
Insurers such as Allstate Floridian Insurance Co. and Nationwide Insurance Co. of Florida based rate increase requests last year on storm risks over the next five years instead of the customary 100 years. A special state commission approves risk prediction methods, but use of unapproved methods, such as the five-year projection, results in higher insurance rates.

"This is the single most significant issue that we've heard," said Geller, co-chairman of the Senate Select Committee on Property Insurance Accountability, formed last month to hold insurers accountable for rate cuts that legislators pledged to the state's homeowners last year.

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Another issue senators may want to look at during the regular session, Geller said, is whether to clarify a state law enacted in 2006 that allows insurers to earn "reasonable profits."

State insurance regulators have recommended insurance companies use a 3.7 profit margin — not including income earned on investments — to calculate property insurance prices. But executives from companies such as Allstate Floridian, Nationwide and Hartford Insurance Co. of the Midwest testified that they used profit margins of 15 percent or more to calculate rate requests last year. What's more, Hartford officials said they used $1 billion last year to buy back stock. Allstate also has bought back stock in recent years.

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In December, Gov. Charlie Crist threatened to sue the insurance industry, and state Insurance Commissioner Kevin McCarty last month tried banning Allstate Insurance Co. and nine affiliates from selling new insurance policies statewide until they turn over all the financial documents his office wants as part of an investigation. A state appeals court blocked McCarty and now the two sides are locked in litigation.

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