Allstate Home Rate Hike Blocked In Texas

The Texas insurance regulator said yesterday he would continue to work with Allstate to resolve issues after he halted the company's statewide 5.9 percent hike in home insurance rates.

Allstate Texas Lloyd's said the increases were actuarially justified, but in an order dated Monday disapproving the rate jump, Insurance Commissioner Mike Geeslin described the insurer's calculations as flawed and the rate amount as excessive and illegal.

“The company filed a rate increase on the same day that it took effect, so the response had to be swift,” Mr. Geeslin said in a statement.

He added, “We have been working with Allstate for several weeks, and even with this most recent filing maneuver, we will continue to work with the company on resolving these issues.”

“The goal of a stable market–a challenge for any Gulf Coast state–is reached via the simple plan of justified rate changes and, where possible, gradual change. We feel Allstate can help us reach this goal and want them to be a key player in the market,” he continued.

However, the commissioner's formal order for the company not to raise rates was harsh in tone. The company's rating practices require supervision, he wrote, because it has “repeatedly filed and used rates the commissioner has determined to be excessive, inadequate, unreasonable and/or unfairly discriminatory for the risks to which they apply in violation of Texas law…”

In addition to the order blocking the increase, he put through a separate order halting any increases in premium rates without his prior approval until he finds that the criticized rating practices no longer exists.

Mr. Geeslin raised more than a dozen objections to the rate filing, including the company's failure to remove nonhurricane catastrophe losses that would be excluded by higher deductibles in coastal zones.

Bill Mellander, a spokesperson for the Allstate Texas unit, said the order was not actually delivered until yesterday. “It doesn't change our position. We continue to believe it is actuarially justified. We think it [the rate hike sought] is competitive and it is fitting with our deeper philosophy of providing the right product at the right price.”

Allstate was also blocked on an additional 2.1 percent filing to cover what Mr. Mellander said is the company's net cost of reinsurance.

Unlike the 5.9 percent figure, he said the reinsurance filing varies depending on the rating territory. “It's two distinct filings, and for the bulk of the state the increase for net cost of reinsurance would be negligible,” he explained.