Travis County District Judge Margaret Cooper has ruled that a loophole in state law allows Allstate to continue charging its policyholders a rate that the insurance department deems excessive. Texas Watch points to this as an example of how Texas's current system of insurance industry oversight is broken and is calling on lawmakers to give the insurance commissioner the authority to approve rates before - not after - they are imposed on Texas homeowners.
State's attempt to roll back 5.9% rate hike is rejected Court upholds Allstate homeowner insurance increase
By CHRISTY HOPPE - The Dallas Morning News - Oct. 18, 2007
AUSTIN – Allstate Insurance can continue to charge a 5.9 percent rate increase that it imposed on homeowner policies in August after a court threw out the state's attempt to roll back the increase.
Allstate maintained that its rate increase followed state law and that the Texas Department of Insurance acted improperly in trying to nullify it. A state district judge in Travis County agreed and issued an order Monday evening.
Bill Mellander, a spokesman for Allstate, said the insurer had been certain the judge would affirm that the increase was implemented correctly.
"We are equally as confident that the rate itself is competitive, justified and, more importantly, that it is attractive and good for the consumer," Mr. Mellander said.
Insurance Department spokesman Jerry Hagins said the agency is disappointed in the judge's ruling but stands by its decision that the new rate is excessive. The agency will continue to pursue an order requiring Allstate to roll back its rates and give refunds to customers.
At issue is the state's "file and use" law, which largely has unregulated insurance rates. As envisioned by lawmakers, insurance companies can file notice of new rates with the state insurance agency but don't have to wait for the regulatory process before using the new charges.
If the state found the new rates to be excessive, the insurance agency could order them rolled back and the insurer would reimburse its policyholders.
In Allstate's case, the company already is in court over a 2004 rate hike, fighting the state's contention that it overcharged its policyholders $56 million and owes them a refund.
When it filed the rate hike in August, the charges took effect immediately, but the state fought the increase, saying it disapproved of the new amount. The judge said Allstate followed the law.
"This says that the file-and-use system is broken," said Alex Winslow, executive director of Texas Watch, a consumer-advocacy group.
He said that if history is a guide, the state will again find new rates excessive and Allstate will go to court and fight any refunds.
"I don't think Allstate policyholders should be holding their breath," Mr. Winslow said.
The state's largest home insurer, State Farm, has been fighting a customer refund in the courts since 2003.
With the rate hikes effective immediately, the state has to play catch-up to determine whether the rate is unjustified.
"The bottom line is that Allstate is driving a huge truck through a loophole in the law, and I have no doubt that other insurance companies are cranking up their engines as we speak," Mr. Winslow said.
Staff writer Karen Brooks contributed to this report.
Read more in the Dallas Morning News
2 comments:
see this?: Chronicle article on allsate
Thanks for pointing out that link. It's a good article and is now on the site.
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