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Allstate granted rate hike of 22%

Florida customers of Allstate Corp. will soon see their homeowners insurance rates rise again, but then the company will freeze premiums until the end of 1998.

Insurance Commissioner Bill Nelson on Friday granted the Northbrook, Ill., insurer permission to increase rates by a statewide average of 22 percent. In turn, Allstate agreed to the freeze.

With this latest increase, the company's homeowners premiums will have more than doubled since Hurricane Andrew struck South Florida in 1992, said Don Pride, an Insurance Department spokesman.

Allstate in June proposed a rate increase as part of a plan that would allow it to stop refusing to renew Florida policies. It has been refusing to renew customers as fast as state law allows since Andrew.

That storm caused more than $15-billion worth of damage in Florida and drove nine insurers out of business. Allstate feared the same fate might befall it if another big storm struck a major Florida urban area.

Under its plan, Allstate also will transfer 137,000 homeowners policies to Clarendon National Insurance Co., a highly rated New Jersey company. Neither Allstate nor the Insurance Department would say how many of these policyholders live in the Tampa Bay area.

Customers whose policies are changing hands will be notified over the next several months, and the transfers will take effect on the policy renewal date following Oct. 31, said company spokesman Al Orendorff.

For the first year, Clarendon has agreed to charge the same premium on these policies that Allstate would have charged if it had kept them. That means, these folks, too, probably will see their rates rise by an average of 22 percent, said Pride of the Insurance Department.

At the end of that year, Clarendon will be free to seek a rate increase because it is not bound by Allstate's rate freeze, he said.

State regulators still have to approve a final piece of the Allstate plan _ the transfer of part of another 67,000 Allstate policies to an industry-backed pool, called the Florida Windstorm Underwriting Association. The FWUA provides homeowners coverage along the coast for wind damage caused by hurricanes.

For policyholders in this group, Allstate will continue to cover risks like fire, theft and liability. These homeowners, therefore, will have two policies and have to make separate premium payments, though their Allstate agent can handle both.

Allstate and the Insurance Department already have agreed in principle to this part of the plan, Pride said. So it, too, should be approved when the company files its formal proposal in the next several months.

If regulators do approve, Allstate will not only stop refusing to renew homeowners policies, but it will also write at least 25,000 new policies a year in 1996, 1997 and 1998 in non-coastal areas, Pride said.

Allstate's total number of Florida homeowners policies will fall to 675,000 once the transfers are complete, but before it begins writing the new coverage.

That's down from about 1-million when Andrew struck the state. At 675,000, Allstate would have the third-largest share of homeowners policies in Florida, behind State Farm and the state-run Joint Underwriting Association.

Allstate also is creating a separate subsidiary to assume all of its Florida homeowners, renters, condominium and boat policies. The subsidiary will be based in St. Petersburg, where Allstate already has a regional office employing 151 people. For now, the company doesn't expect to hire additional workers there, Orendorff said.

Forming the new subsidiary allows Allstate to buy a form of corporate insurance that will help it pay Florida claims in the event of a monster hurricane. Called reinsurance, this coverage is essentially insurance for insurers.

Allstate's shares, which trade on the New York Stock Exchange, closed Friday at $44.62{, up $1.