TALLAHASSEE — In a sweeping victory for Florida insurance regulators, Allstate Corp. agreed Friday to pay a $5-million fine, write 100,000 new homeowners policies in Florida over the next three years and lower the premium on each of its nearly 250,000 existing Florida policies by 5.6 percent.
In its agreement with regulators, Allstate also promised to not seek a rate increase for at least a year, to continue cooperating with a Florida Office of Insurance Regulation investigation into the company's rate-making practices and to waive all right to challenge the agreement in court.
Allstate, based in Northbrook, Ill., has been locked in a 10-month battle with Florida regulators over how the insurance giant sets its rates. Florida's fourth-largest property insurer, Allstate last fall sought a statewide average 42 percent increase in homeowners premiums, despite changes in Florida law designed to lower rates. It was the largest increase sought by any major insurer.
In May, regulators shut down all of Allstate's 10 Florida companies for a day as punishment for not turning over documents that the state said were key to its investigation. The shutdown and related bad publicity was particularly threatening to Allstate's standing and profitability as the second-largest auto insurer in Florida with about 1.7-million policies. Allstate wrote an average of about $564,000 a month in new auto business in the state last year and sells about 3,500 new auto policies a week statewide.
Insurance Commissioner Kevin McCarty's office suspended the one-day ban after Allstate promised that it had turned over the required documents. But the probe continued, leading to Friday's deal.
"It is unfortunate that Allstate's disregard of Florida law required the Office to take the drastic actions that we did in order to bring Allstate into compliance," McCarty said in a statement. "However, the terms agreed to by Allstate in the consent order go a long way toward restoring confidence in Allstate's business practices."
Regulators are still investigating Allstate's reinsurance program and its relationships with risk-modeling companies, insurance rating organizations and insurance trade associations. Allstate, which recorded profits of $4.6-billion last year, has dropped close to a half-million Florida homeowners policies over the past five years.
But as the height of hurricane season approaches, both sides can now turn their attention to other things.
"We are very pleased with the resolution,'' Allstate corporate relations manager Kathy Thomas said Friday. "It demonstrates our desire to work with OIR and put the issues behind us.''
Thomas said Allstate was able to come to terms largely because the company is taking advantage of Florida's hurricane catastrophe fund and because of lower prices within the global reinsurance market.
"That put Allstate in the position to be able to write new homeowner business with a lesser risk," Thomas said.
Another part of the agreement requires that Allstate Floridian forgive a $175-million loan from its parent company, money that was used to pay claims after the 2005 hurricane season.
Gov. Charlie Crist, who was battling dour statistics on the state's economy Friday, welcomed positive news of the settlement.
"Commissioner McCarty has once again done an outstanding job fighting for and protecting the consumers of Florida," the governor said.
Tom Zucco can be reached at firstname.lastname@example.org or (727) 893-8247.