Allstate seeks rate hikes
If approved, increases would go into effect March 1
Allstate Insurance Co. wants to increase the rates for its 71,000 homeowner’s policyholders an average of 11.3 percent statewide and sister company Allstate Indemnity Co. has asked for an average of 5.9 percent increase for its 73,000 policyholders, according to separate filings with the Louisiana Department of Insurance.
Allstate is the state’s second-largest insurer of homes. State Farm is Louisiana’s largest, with 301,000 homeowner’s policies.
The Allstate rate increases, if approved, would go into effect March 1 for existing and new customers. The Allstate Insurance increase would generate $11.9 million, the company said, while the Allstate Indemnity increase would generate $5 million.
“The reason for these filings is because the cost of reinsurance has gone up,” Allstate spokeswoman Allison Hatcher said Monday.
Reinsurance is the insurance that insurance companies buy, Hatcher said. Typically that coverage makes up a larger portion of the premium in coastal areas, where there is a greater risk of hurricane damage.
The vast majority of Allstate Insurance policyholders — less than 75 percent — would see their premiums increase less than 15 percent under the proposed rate filing, Hatcher said.
Meanwhile, more than 85 percent of Allstate Indemnity policyholders would see a rate increase of less than 10 percent.
Earlier this month, Bloomberg News reported that reinsurers’ strong capital base meant only policies covering the countries hit hardest by catastrophes in 2011 — Japan, Thailand and New Zealand — faced significant increases. Although 2011 was reinsurers’ most expensive year for natural disasters, earthquakes and hurricanes in the United States’ market didn’t hurt reinsurers. Insurance Commissioner Jim Donelon said the Insurance Department is examining Allstate’s proposed rates.
Donelon said offshore companies — those in Zurich, London and Bermuda — account for two-thirds of the reinsurance sold.
Those companies are not regulated by state or federal governments and are free to price their product as competition allows, Donelon said. For the most part, the reinsurance cost is simply passed along to the policyholder.
However, Allstate is for the most part self-reinsured, he said. Allstate gets its reinsurance from a sister company.
Because of that, Allstate and its reinsurance are subject to more scrutiny, Donelon said.
Among other things, the department will check which catastrophe models Allstate used to calculate its rates, as well as the company’s post-Hurricane Katrina rate increases compared with the industry average, Donelon said.
Both Allstate companies last increased homeowner’s rates in 2010. Allstate Insurance raised rates by 11.6 percent after the Insurance Department rejected a request to raise rates an average of 27.6 percent. Allstate Indemnity increased rates by 3.3 percent in 2010.