Newspaper article THE JOURNAL RECORD

Allstate Wins 30% Rate Hike

Newspaper article THE JOURNAL RECORD

Allstate Wins 30% Rate Hike

Article excerpt

Homeowners with Allstate Insurance policies will face a 30 percent increase in 2002 after approval of a base rate increase at Thursday's meeting of the State Board for Property and Casualty Rates.

Although it will be little consolation, the increase could have been worse. Allstate had asked for a 48.6 percent increase yielding more than $22 million.

However, from the time Allstate filed its request in August, approval of such a large rate hike appeared unlikely -- the board has a long-standing policy of not granting rate increases of more than 25 percent.

In addition, Steven P. Lattanzio, a New York actuary with Actuarial Technical Solutions hired by the Insurance Department to review the request, labeled it "excessive" and said an increase of 35.5 percent was all that could be justified.

Allstate officials said a changing marketplace has left the company with no other option than to ask for a huge increase. Although the company has a goal of making a 5 percent underwriting profit each year, Allstate has failed to do so "for years" in Oklahoma, officials said.

For five of the last six years, Allstate has lost money on homeowners underwriting in Oklahoma, officials said, with losses of more than $70 million.

Allstate currently has a 117 loss ratio, meaning the company is paying $1.17 in claims for every $1 that it receives in premiums.

The increasing cost of construction has hurt homeowners underwriting, said Bonnie Wittman, state filing director for Allstate, and the millions lost in other states due to toxic mold claims have further weakened that segment of the company's business.

"We've been taking very big hits in Texas," she said.

In the past, the company has used profits from its automobile policies to subsidize homeowners insurance, but declining profits in that market mean Allstate "can't do that anymore," Wittman said.

In addition to using automobile policy profits, investment earnings have also helped insurers offset homeowners underwriting losses, but the stock market's recent decline has eliminated much of that revenue stream.

"We need relief. We are hemorrhaging money and we need to put a Band-Aid on it," said John Haas, southwest regional counsel for Allstate.

Allstate is the third-largest homeowners writer in Oklahoma, with more than 70,000 policies in the state comprising 9.1 percent of market share.

(State Farm Fire and Casualty is the largest writer with 27.2 percent market share and Farmers Insurance is the second-largest writer with a 23.7 percent market share.)

Board officials appeared reluctant to prevent Allstate from increasing rates due to the company's market power in Oklahoma.

"It'd be awful if the third-largest underwriter were to pull out," said board member John Marshall.

Wittman said Allstate officials deliberated "for months" before deciding to ask for a 48. …

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