Allstate to pay $60 million in Texas refunds
Homeowners to benefit after state regulators challenged rates
By TERRENCE STUTZ / The Dallas Morning News
AUSTIN – Allstate Texas Lloyds, the second-largest home insurer in the state, announced Monday that it will refund $60 million to its 686,000 Texas customers under an agreement with state insurance regulators.
The refunds will equal 8.75 percent of the premium paid by each homeowner with an Allstate policy during the last year – an average of $91.
One year ago, the company cut its premiums 10.1 percent after its rates were challenged by the Texas Department of Insurance.
In announcing the refunds, Allstate officials said the company – unlike two other major insurers – stayed in the homeowners market during the mold damage crisis from 2001 into 2003. Both State Farm and Farmers – the largest and third-largest insurers – quit accepting new business for much of that period.
“We’ve taken a stand in Texas by supporting our customers, creating new insurance choices and taking a disciplined approach to pricing and underwriting,” said Gary Briggs, an Allstate vice president.
A leading consumer group applauded the settlement but called it a case of “good news, bad news” for Texas homeowners.
Dan Lambe of Texas Watch said that, while the insurer’s customers will get refunds, Allstate “was caught red-handed gouging Texas homeowners by millions of dollars, and only now are Texas policyholders finally getting the rate relief they were promised” a year ago.
Allstate quickly settled differences with the state over its rates in 2003, but Farmers and State Farm are in court fighting orders from Insurance Commissioner Jose Montemayor to lower their premiums, 12 percent for State Farm and 17.5 percent for Farmers.
Texas homeowners pay the highest premiums in the nation.
Most Allstate customers will see the refunds on their policy renewals beginning Sept. 7. Those no longer with Allstate will receive refund checks.
According to a rate guide on the Texas Department of Insurance Web site, the average premium on a $100,000 brick veneer home in Dallas County has been $1,039. That rate is for a typical homeowner with a good credit rating who has a 1 percent deductible.
Gov. Rick Perry said the $60 million refund is further proof that the insurance reforms passed last year are working, but Mr. Lambe said the job “is not finished.”
Mr. Lambe said the insurance department needs to look at further rate reductions and the Legislature needs to pass increased penalties for companies that “price gouge” Texas families.
Justin Schmitt, a spokesman for Allstate, insisted the company “has been a leader in providing affordable and available insurance.”
“While homeowners insurance was profitable for Allstate last year – as reflected in the refunds – rates are not based on one year’s worth of experience,” he said. “Allstate still has to deal with the experience of significant losses over the past five years on property insurance business written in Texas.”
Preliminary first-quarter financial reports for the insurance industry showed that losses on homeowners policies were near their lowest levels in more than a decade.
An estimated 35.3 percent of premiums collected in the first quarter were paid to settle homeowners insurance claims, well below the 58 percent loss ratio in 2003 – considered a good year.