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Allstate's insurance rates set for increases
By Laura Elder
The Daily News
Published June 30, 2006
In a move that could boost the cost of homeowners' insurance for some coastal policyholders by as much as 20 percent, Allstate Corp. said Thursday it planned to increase rates across Texas.
But motorists received good news as the company is to decrease its automobile rates by about 3 to 5 percent.
The state's second-largest insurer cited the rising cost of reinsurance when it filed for the homeowner-policy increase with the Texas Department of Insurance.
The filing called for a 5.6 percent hike across the state, but coastal residents will pay more to reflect the risk of hurricanes, said Joseph McCormick, an Allstate spokesman.
Allstate rates on average will increase by between 8 percent and 10 percent for Galveston County residents who live in brick homes.
But residents in wood-frame houses could see their rates jump by 20 percent, although that would be rare, McCormick said.
"Most will be in the 15 percent range," he added.
The increases, effective July 22, affect only policyholders who buy their windstorm coverage through Allstate. It won't affect customers who buy their windstorm coverage through the state pool managed by the Texas Windstorm Insurance Association.
In May, Allstate notified customers it would drop windstorm-policy protection from homeowner coverage starting in October.
The company has 10,000 homeowner-policy customers in Galveston County, about 6,500 of whom already buy windstorm coverage through the state pool, which is the insurer of last resort for high-risk properties.
Allstate warned earlier this year it planned to raise rates because of the climbing cost of reinsurance, a method by which insurers buffer their risk by purchasing their own insurance to cover part of the cost of compensating customers' catastrophes.
The company has $650 million in reinsurance coverage in Texas, compared with $550 million last year.
Its rate hike comes after State Farm said it planned to raise rates for some coastal customers on average 57 percent because of reinsurance costs.
About 30 percent of a consumer's premium dollar is based on reinsurance costs.
Texas law allows Allstate to begin charging the new rates upon filing them with the Texas Department of Insurance. But department officials can review the rate changes and order refunds to consumers if they deem the increases excessive, or they could stop the increases before they take effect.
In May, Texas Insurance Commissioner Mike Geeslin signed an order requiring Allstate Texas to reduce rates for all Texans by 5 percent.
The order also required Allstate to refund to policyholders the amount it has overcharged them since December 2004, plus interest at an annual rate of 13.5 percent.
That refund amounted to about $60 million, according to reports.
By Laura Elder
The Daily News
Published June 30, 2006
In a move that could boost the cost of homeowners' insurance for some coastal policyholders by as much as 20 percent, Allstate Corp. said Thursday it planned to increase rates across Texas.
But motorists received good news as the company is to decrease its automobile rates by about 3 to 5 percent.
The state's second-largest insurer cited the rising cost of reinsurance when it filed for the homeowner-policy increase with the Texas Department of Insurance.
The filing called for a 5.6 percent hike across the state, but coastal residents will pay more to reflect the risk of hurricanes, said Joseph McCormick, an Allstate spokesman.
Allstate rates on average will increase by between 8 percent and 10 percent for Galveston County residents who live in brick homes.
But residents in wood-frame houses could see their rates jump by 20 percent, although that would be rare, McCormick said.
"Most will be in the 15 percent range," he added.
The increases, effective July 22, affect only policyholders who buy their windstorm coverage through Allstate. It won't affect customers who buy their windstorm coverage through the state pool managed by the Texas Windstorm Insurance Association.
In May, Allstate notified customers it would drop windstorm-policy protection from homeowner coverage starting in October.
The company has 10,000 homeowner-policy customers in Galveston County, about 6,500 of whom already buy windstorm coverage through the state pool, which is the insurer of last resort for high-risk properties.
Allstate warned earlier this year it planned to raise rates because of the climbing cost of reinsurance, a method by which insurers buffer their risk by purchasing their own insurance to cover part of the cost of compensating customers' catastrophes.
The company has $650 million in reinsurance coverage in Texas, compared with $550 million last year.
Its rate hike comes after State Farm said it planned to raise rates for some coastal customers on average 57 percent because of reinsurance costs.
About 30 percent of a consumer's premium dollar is based on reinsurance costs.
Texas law allows Allstate to begin charging the new rates upon filing them with the Texas Department of Insurance. But department officials can review the rate changes and order refunds to consumers if they deem the increases excessive, or they could stop the increases before they take effect.
In May, Texas Insurance Commissioner Mike Geeslin signed an order requiring Allstate Texas to reduce rates for all Texans by 5 percent.
The order also required Allstate to refund to policyholders the amount it has overcharged them since December 2004, plus interest at an annual rate of 13.5 percent.
That refund amounted to about $60 million, according to reports.