While Allstate is looking for a 12 percent increase in homeowners rates this fall, a consumer group is seeking to force rate decreases in the state for the personal lines giant.

Dan Zohar, representing the Foundation for Taxpayer and Consumer Rights, said he will seek a reduction that will save homeowners an estimated $400 million per year.

He noted that all major insurance carriers have been lowering their rates in the past year.

"Apparently, Allstate's 'good hands' have been in everyone's wallet and it has been profiting its policyholders excessive rates for disaster insurance," he said.

Allstate and the Department of Insurance have been at odds since the carrier announced earlier this month it was no longer writing new homeowners' policies in the state.

California Insurance Commissioner Steve Poizner said the DOI will seek refunds for Allstate home insurance customers if it determines that their current rates are excessive.

This would be the first time in California history that a retroactive refund is ordered following a rate hearing, he noted. Mr. Poizner promised to scrutinize the carrier's rates earlier this month after Allstate announced it would not take new business in the state.

The department has issued a show cause order requiring the Northbrook, Ill-based carrier to prove that its homeowner rates in the state are not excessive.

"I am drawing a line in the sand," said Mr. Poizner. "If I find that Allstate's rates are excessive, refunds will occur. I will take clear and decisive action to protect consumers."

Mr. Zohar claimed some credit for persuading the commissioner to take this action and said seeking the rate decreases going forward is only the next logical step in the process.

At the conclusion of the hearing, the commissioner will determine the validity of the rates. If they are deemed excessive, the commissioner will order Allstate to reduce its rates and determine whether refunds are warranted.

Department spokeswoman Jennifer Kerns said that while the excessive rate and normal rate hearings will be one and the same, the show cause order will require the company to provide more extensive data.

California's Proposition 103 prohibits excessive rates and directs the insurance commissioner to take necessary steps to lower them when excessive.

Rich Hallberg, Allstate's California spokesman, said the 12 percent rate increase is needed to ensure the company will be in a strong position to help meet the needs of policyholders in the long term, particularly the cost of special assessments from the California Earthquake Authority and the cost of reinsurance contracts.

As for any allegedly excessive past charges, he noted that all rates were approved by the department before implementation.

In the days since Allstate announced it would no longer write new homeowners policies in California, insurers such as Safeco and Farmers Insurance have said they will expand their presence in the California market, particularly in the area of homeowners insurance.

Special Reports /

Calif. Consumer Group Seeks $400M Allstate Cut

Related Stories

Recommended For You