Florida Commitee Hears from Nationwide and Allstate on Homeowners Rates

Executives from Nationwide and Allstate units doing business in Florida testified before the state's newly formed Senate Select Committee on Property Insurance Accountability that the companies have complied with legislation designed to lower rates for homeowners insurance. 
 
Nationwide Insurance Company of Florida was awarded in March by an arbitration panel a 54% rate increase, but the carrier then implemented House Bill 1A and filed a 16.1% "true up" decrease for a final increase of 21.3%, explained Nationwide officials in Florida. 
 
Allstate Floridian told the panel it had to raise rates to cover losses from past storms and protect its policyholders from the threat of more hurricanes. 
 
In January, after hearing testimony from the Florida Office of Insurance Regulation, Florida's Legislature chose to create its own committee and planned to call in insurance industry executives Feb. 4 and Feb. 5 to answer questions under oath about what they called the industry's failure to pass along savings to consumers. Insurers were required by law to reduce rates after the state-run catastrophe fund was expanded by $12 billion to offset reinsurance costs. 
 
"I think it was a good opportunity for us," said Allstate spokesman Adam Shores. "There was fairly balanced dialogue. We started early and we stayed late to answer all questions, so hopefully the senators saw that we are working hard to strike a balance between securing a rate that is affordable to consumers, but that can also protect them in the event of a catastrophe." 
 
In November, the OIR denied several of Allstate's proposed rate increases. Allstate Floridian Indemnity and Allstate Florida Insurance Co. had requested rate increases of 28.3% and 41.9%, respectively. Allstate-owned Encompass Floridian Indemnity asked for a 38.4% increase, and Encompass Floridian Insurance Co. requested a 39.7% rate hike. Allstate said reinsurance costs are driving the need for higher rates in the Sunshine State, and the company believes it needs more reinsurance than that provided by the expanded Florida Hurricane Catastrophe Fund. 
 
Jeff Rommel, regional vice president of Nationwide's Florida operations, said in a statement that it received OIR approval in October after filing for a decrease to comply with the law. With the legislation, "the average Nationwide homeowners customer in Florida would pay an average $448 more on their insurance premiums this year," he said. 
 
Joseph Richardson Jr., chairman and chief executive of Allstate Floridian, told the panel the company was nearly bankrupted after the 2004 and 2005 hurricane seasons -- paying out $1 billion more than it made in premiums during that time. 
 
"The hurricanes during that time wiped out all the capital and surplus that the company built up in all previous years of its existence," Shores said. Allstate Floridian began in 1996. 
 
Rommel put to rest rumors that the company factors in expenses from other states when calculating Florida rates. Insurance companies are prohibited from doing so, he said. In addition, automobile insurance profits in Florida are not making up for losses in homeowners. 
 
"Simply put, those assumptions are not valid," Rommel said. Nationwide in Florida has lost more than $300 million in homeowners since 1988. The loss for both lines is $150 million, he said. 
 
Other companies scheduled to appear before the Senate Committee on Feb. 5 were Hartford Insurance Co., Florida Farm Bureau and American Strategic.