Allstate Subsidiaries Propose Homeowner's Insurance Premium Hikes

Published: Tue 13 Jul 2010

Perry Begay

Florida regulators will consider a statewide 33-percent average premium increase request this month from Castle Key Insurance, a subsidiary of Allstate Insurance.

The Floridian Allstate companies, which changed their title last year to Castle Key, issue about 250,000 policies in the state, which makes Allstate the third-biggest private home insurance company. Almost 75 percent of those policies are issued by Castle Key Insurance, which by itself is the sixth-biggest insurer after state-supported Citizens Property Insurance, State Farm Florida, Universal Property and Casualty, St. Johns, and USAA.

The remainder of the Allstate home insurance policies are written by Castle Key Indemnity, which has requested an average statewide rate hike of 18 percent.

Amy Moore, a spokesperson for Allstate Insurance, reported that the average increase for Castle Key Insurance translates into $412 per year, or $34 monthly, for homeowners, and the average rate increase for Castle Key Indemnity translates into an additional $243 yearly, or $20 per month.

Justifying the Rate Hike

Moore argued that the rate hikes are essential to shore up the insurers' claims-paying reserves because expenses are rapidly outstripping expenses, including back-up coverage expenses and claims for theft, fires, and storms. "Castle Key has not received a significant rate increase in nearly five years," she contended. "We need to maintain adequate capital to remain strong and positioned to deliver on our promise to customers."

After the Office of Insurance Regulation investigated Allstate, the insurer reached an agreement in 2008 with regulators to lower homeowner insurance premiums across the state by 5.6 percent, pay a fine of $5 million, write 100,000 new home insurance policies, and forgive a loan of $175 million to its subsidiaries in Florida.

Don Brown, a former state representative, castigated regulators for publishing a statement in the final week of the legislative session of 2010, claiming that Castle Key Insurance may take over 50,000 home insurance policies from Citizens Insurance without disclosing that the policies are included in the 100,000 regulators required Allstate to sell.

Mr. Brown, who is also an insurance agent, questioned whether Allstate consented to take half of the 100,000 policies from Citizens in order to placate regulators before requesting a rate hike.

Castle Key Indemnity, the subsidiary of Allstate that requested the more modest rate hike, is the company selling the new homeowners policies. Moore reported that it will not consider taking over Citizens home insurance policies until 2011.