Allstate Objects to Texas Ruling It Overcharges Homeowners 10%

April 20, 2006

Two judges have ruled that Allstate Insurance charges excessive rates for homeowners insurance and should reduce them.

State insurance regulators want the company to reduce its homeowners rates by 10 percent and refund its customers for rates dating to Dec. 30, 2004.

“The decision supports our contention that Allstate has been using excessive rates in Texas,” said Jim Hurley, a spokesman for the Texas Department of Insurance.

Allstate, which has 800,000 customers in Texas, said it will file objections to the judges’ decision.

“We maintain that our rates are competitive and reasonable and appropriate for the risk in Texas,” Allstate spokesman Joe McCormick told the The Dallas Morning News.

McCormick said Allstate’s home insurance rates are less than they were in early 2003, before the state enacted a reform law to address rising insurance rates. The company reduced premiums 10 percent in late 2003 and has not raised them since, officials said.

Administrative law Judges Craig Bennett and Tommy Broyles made their preliminary findings after examining the company’s premiums, claims and profits. Their final ruling will set a specific rate decrease.

The judges’ decision will be reviewed by Insurance Commissioner Mike Geeslin. Hurley said the commissioner typically accepts the findings of administrative law judges in rate cases.

State regulators also want Allstate to pay interest of 11.25 percent until it pays the refunds.

Some estimates have put the total amount of overcharges at more than $60 million, not including interest, the newspaper reported.

The state’s three largest home insurers are each involved in legal battles over their rates.

State Farm is fighting an order to reduce its rates by 12 percent.

Farmers is before the Texas Supreme Court over a $117 million settlement with the state that has been challenged by a group of policyholders.

Consumer advocates praised the judges’ preliminary decision on Allstate. Alex Winslow of Texas Watch said the insurance department should act on the judges’ decision and order the company to reduce its rates.

“It is no surprise to Allstate policyholders that their company has been overcharging them for years,” Winslow said.

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