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11:39 PM CDT on Thursday, August 23, 2007
By CHRISTY HOPPE / The Dallas Morning News
AUSTIN – Allstate should face penalties of $25,000 for each homeowner policy it sells that contains new, increased rates that have been flatly rejected by Texas Insurance Commissioner Mike Geeslin, the state's consumer advocate said Thursday.
In a petition filed with Mr. Geeslin's office, Public Insurance Counsel Rod Bordelon accused Allstate of violating insurance laws and "bad faith rating practices." Allstate has already applied the increase in some cases.
"These rates are now and have been excessive for months," Mr. Bordelon said. "It's time we penalize Allstate for their actions and give their policyholders the lower premiums they deserve."
Mr. Bordelon said he can't recall the last time his office asserted the need for penalties against an insurance company, but, "we've had a history of notifying Allstate that their rates were excessive, and then Monday, they went over the line."
On Monday, Allstate announced that it would immediately implement a 5.9 percent boost to cover potential property losses.
Under the state's file-and-use system, insurers can implement rate hikes, but they are subject to rollbacks and refunds if the commissioner subsequently finds them to be excessive or unjustified.
One day after Allstate, which has 917,000 policyholders in Texas, announced its new rates, Mr. Geeslin ordered the insurer to cancel the increase. The commissioner also said that Allstate – like State Farm, which has also locked horns over rate increases – would now need prior approval before implementing any increases.
Texas has one of the highest homeowners' insurance rates in the nation, and the state agency has been fighting a number of insurers that have pushed for even costlier policies.
Bill Mellander, a spokesman for Allstate, said that the rate increase is justified by actuarial data and that the company is still applying the increase to new and renewing policies.
The commissioner's order that Allstate can no longer use the file-and-use system came after the 5.9 percent increase had been implemented, he said.
"The rate is still active in our system because it's a competitive and actuarially justified rate and one that consumers are finding attractive," Mr. Mellander said.
He said the increase is needed to continue to offer the service and response Allstate policyholders expect and to remain competitive in the Texas market.
But Mr. Bordelon accused Allstate of using inflated numbers to project its losses and consistently trying to hit its customers with unjustifiably high rates during the last three years. Mr. Geeslin's office had no immediate comment on the petition for penalties.
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