Allstate Must Lower Homeowners' Insurance Rates $242 Million a Year as a Result of Proposition 103's Consumer Protection Rules
July 10 2008 - 4:27PM
PR Newswire (US)
Consumer Advocates Applaud Commissioner Poizner's Ruling, Shift
Focus to Investigation of Possible Refunds for Past Allstate
Overcharges SANTA MONICA, Calif., July 10 /PRNewswire-USNewswire/
-- Allstate (NYSE: ALL) homeowners' insurance customers will save
$242 million a year under a Wednesday order by Insurance
Commissioner Poizner that the company lower its premiums by 28.5%.
Allstate's California homeowners policyholders will pay about $250
less a year. The nonprofit, nonpartisan Consumer Watchdog
challenged a 9.8% rate increase request made by Allstate last year
under the rules of the voter approved insurance reform measure
Proposition 103. The company quit selling new homeowners insurance
policies in California almost a year ago in the middle of wildfire
season. "For the Insurance Commissioner to not only reject
Allstate's request for a rate increase, but to also accept our
arguments for a substantial decrease, is a tremendous victory for
California homeowners," stated Los Angeles attorney Daniel Y. Zohar
with the Zohar Law Firm, lead outside counsel for Consumer Watchdog
at the Allstate hearings. "In these times of economic uncertainty,
hundreds of thousands of consumers will be able to keep more of
their hard-earned money, rather than have to line the ever-swelling
pockets of Big Insurance. Importantly, this decision sends a clear
message to all insurance carriers that if they try to overcharge
California consumers, they will be stopped in their tracks." An
Ongoing Proceeding Will Investigate Whether Allstate Should Also
Provide Refunds to Customers Consumer Watchdog said Thursday that
it will now turn its attention to a regulatory proceeding
investigating whether Allstate should also be required to refund
homeowners hundreds of dollars each for overcharges in recent
years. In 2007, Consumer Watchdog agreed to put the issue of
refunds for past overcharges on hold until the Commissioner ruled
on Allstate's rate hike request. The group said it would
immediately begin to work on pursuing refunds now that the
Commissioner rejected the company's rate hike request and ordered
substantial reductions. Allstate's net income for 2006 alone was
approximately $5 billion and total shareholder return was 590%
between 1994 and 2006. Ironically, Allstate claimed it needed to
raise its rates because the company would suffer extreme financial
hardship if required to live by the same regulations as other
insurers. The increase Allstate sought here, in part, was based on
its claim that it should be allowed to build a higher profit margin
into its rates to earn a 12.85% rate of return instead of the
10.17% allowed under California regulations. The company made the
same claim when trying to fend off a similar decrease to their auto
insurance rates. But Allstate was ordered by the Commissioner to
reduce its auto insurance rates by about $250 million in March.
Allstate also sought to pass through to its customers $80.8 million
in premiums it pays to buy reinsurance, which is not allowed for
homeowners' insurers in California. "Allstate boasted of record
profits to Wall Street, then came to California claiming it's not
making enough money in order to charge its policyholders higher
premiums. Proposition 103's prohibition on excessive rates
protected California consumers with home and auto insurance
policies from Allstate's price gouging and saved them over half a
billion dollars this year," said Pamela Pressley, litigation
director at Consumer Watchdog. Using Proposition 103, Consumer
Watchdog has helped Californians save more than $1 billion in
challenges to auto, homeowners', and medical malpractice insurance
rate proposals since 2003. View a full list of these savings here:
http://www.consumerwatchdog.org/images/InsSavings.gif Consumer
Watchdog (formerly the Foundation for Taxpayer and Consumer Rights)
is a nonpartisan, nonprofit consumer advocacy organization. Learn
more at http://www.consumerwatchdog.org/ DATASOURCE: Consumer
Watchdog CONTACT: Doug Heller, +1-310-392-0522 ext. 309, or Carmen
Balber, ext. 324, both of Consumer Watchdog Web Site:
http://www.consumerwatchdog.org/
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