Fla. Regulator Suspends Allstate Over Subpoena

BY DANIEL HAYS
NU Online News Service, Jan. 16, 9:45 a.m. EST

A hearing probing the background of Allstate’s Florida property insurance rate hike requests was abruptly halted yesterday by the state insurance commissioner, who said the company failed to provide the information he wanted.

Today Commissioner Kevin McCarty said he was suspending Allstate’s license until they complied with the Office of Insurance Regulation’s subpoena demanding a variety of information. He said the move would not affect the company’s ability to provide coverage to current policyholders or those seeking renewals.

In breaking off the hearing yesterday Mr. McCarty cancelled what was to be a two-day session with Allstate executives called to the capital in Tallahassee to respond to the subpoena. An Allstate spokesman denied Mr. McCarty’s description of the insurer as uncooperative, and said the carrier had provided thousands of documents and continued to produce them.

Mr. McCarty’s move, which he had hinted at last week in an interview with National Underwriter, interrupted a session that OIR said was to examine Allstate’s reinsurance program as well as its relationships to risk-modeling companies, insurance rating organizations and insurance trade associations.
“Allstate was to have provided all appropriate company documents related to the above topics, but failed to do so,” OIR said. Mr. McCarty said in a statement that “Allstate’s total lack of cooperation and responsiveness made it unproductive to continue the hearing.”

“The bottom line is that it is not fair to Florida consumers that this company has not complied with our subpoenas and is not willing to explain to us their relationships with rating agencies, modeling companies and trade groups, and how these relationships might have influenced the huge rate increases they have requested,” he added. “I am as deeply concerned as any consumer at the lack of respect that Allstate has shown toward their statutory responsibilities,” he said.

Commissioner McCarty advised those in the hearing that he was adjourning to consider options that could include a fine, suspension or even revocation of Allstate’s certificate of authority--essentially taking away its right to do business in Florida. The commissioner said he expects to make his decision very soon.

Allstate is the latest company with which the OIR has clashed over rates, which state officials expected would be lowered after the legislature passed a measure allowing the Florida Hurricane Catastrophe Fund to provide insurers with discount reinsurance. OIR’s general counsel, Steve Parton, said while Allstate did provide some documents, the company “refused to provide documents specifically related to their communications with catastrophe modeling companies, insurance rating organizations and insurance trade associations.”

Allstate Floridian Indemnity and Allstate Florida Insurance Company have requested rate increases of 28.3 percent and 41.9 percent, respectively. Encompass Floridian Indemnity requested a 38.4 percent increase, while Encompass Floridian Insurance Company requested a 39.7 percent increase.

An Allstate spokesman, Adam Shores, said since OIR denied those requests, the company had withdrawn a petition to go to an administrative hearing so it could discuss a rate that would be adequate for the company and affordable for customers. Regarding compliance with the subpoena, he said Allstate has “produced since mid-October over 40,000 pages of documents.” He said there have been 60 business days available to get the material together, amounting to 700 pages a day. He said the company outlined in writing a plan to provide material in a series of waves that OIR could review as they were produced, and had verbal conversations about postponing the hearing. “We have complied to the best of our ability,” said Mr. Shore. “We’re with them. They want affordability, and that’s what we want, too. We are players in this game, just like they are.”

Mr. McCarty said last week in an interview that Allstate had objected to areas of interest in the subpoena, including their communications and dealings with rating organizations, risk modelers and trade associations. He said then that, if necessary, “we will go to court to enforce the subpoena.”

Small Brokers May Outpace Big Ones In Soft Market

BY MARK E. RUQUET
NU Online News Service, Jan. 15, 3:20 p.m. EST

Small insurance brokers with leaner operations may do better than their larger competitors and experience some modest growth through the current soft market, said a ratings analyst. The comments came during Fitch Ratings teleconference to discuss its latest report, “Review and Outlook 2007-2008, Insurance Brokerage Industry.”

James Auden, managing director of insurance for Fitch Ratings in Chicago, said during the teleconference that the size of the smaller brokerage firms is an advantage because they are “much leaner” organizations with small staffs that can produce more revenue. Bigger brokers, he continued, have more systems and bureaucracy to support, making them “less limber” to deal with pressures from a soft market and declining prices.

In its report, Fitch said after adjusting to the loss of contingent commissions, some of the larger brokers could see better performance, though modest, in 2007 compared to 2006, but that 2008 will probably provide flat to modest revenue increases. Fitch issued a stable outlook for insurance brokers. Large brokers began giving up contingent commissions in the wake of a New York State investigation in 2004 that uncovered evidence that such commissions served as kickbacks to reward brokers that steered business and rigged bids with a select group of insurers.

Joining Mr. Auden during the call were Gretchen Roetzer and Greg Dickerson, directors with Fitch who reviewed Marsh, Aon and Willis. Both Aon and Willis received primarily positive reports. Ms. Roetzer noted that the sale of the company’s insurance underwriting and adjustment arm since the loss of contingent commissions has put it in a strong position to justify a debt rating of “triple-B-plus.”

Mr. Dickerson said Willis, with a “triple-B” rating, has done well producing exceptional cash flow and excellent operating margins compared to its peers thanks to experienced management. “Fitch believes Willis insurance operations has outperformed those of its closest competitors,” said Mr. Dickerson, “and will continue to do so for the next couple of years.”

On the other hand, while Marsh also received a “triple-B” debt rating because of its competitive position in the market place and diverse operational strength, there still are concerns. Mr. Dickerson noted that most troubling is recent turnover in management, which he said reflects the poor performance of Marsh, a subsidiary of Marsh & McLennan Companies. “While Marsh & McLennan’s rating outlook is stable, this instability does create more uncertainty in the rating,” said Mr. Dickerson. He said the current rating would remain intact provided MMC operations “do not deteriorate from their current levels.”

During a question and answer period Mr. Dickerson said while MMC has suffered some damage with the loss of contingent commissions, the firm remains competitive. “Our sense is that most of the bad news has come out,” he said, “but we are watching the situation carefully.”

In order to continue to compete, some brokers may be tempted to increase their debt, noted Mr. Auden. Going that route would raise flags and could change individual debt ratings if the debt becomes too high, he added. Brokers will probably continue to make acquisitions of smaller firms, he said, but the types of larger deals by private equity firms seen in the past will probably be put on hold for awhile. Concerning reports of pressure to break up MMC, Mr. Dickerson said its diversity is its strength and that while there could be some short-term gain, there would be competitive loss in its offerings.

In an interview with National Underwriter after the call, Ms. Roetzer said Aon’s divestiture of its assets, such as the sale of its Combined Insurance Company, works in its favor because these are not core businesses. What remains at Aon are complementary core businesses that are competitive with Marsh offerings.

Florida Drug-Free Workplace Program

Our partners at Florida Drug Screening have agreed to extend a special discount to Sabal Insurance Group clients in the state of Florida. As of 1/08/2008, they will be waiving their one-time account set-up fee, and reducing drug testing by 15%. This discount does not apply for employers regulated by the Department of Transportation.

For additional information on the services offered by Florida Drug Screening and the discounts available to you, please contact Lillian Giron at Florida Drug Screening, Inc directly. She may be reached at (321) 728-2941 or via e-mail at lillian@drugtestingusa.com

Florida Announces Health Information Website

The Agency for Health Care Administration (AHCA) has announced a new consumer health care website aimed at assisting Floridians in search of accurate, trusted, and unbiased health care information. The newly designed site builds on past developments by combining www.floridahealthstate.com and www.floridacomparecare.gov into one central site, www.floridahealthfinder.gov, and adding additional health care information, including a health encyclopedia with thousands of articles and illustrations.

The AHCA believes that the site will help Florida consumers improve their care and reduce health costs.

The website provides a wealth of information on more than 1,600 diseases and conditions with more than 3,600 articles while linking the information to the health outcome data, when available, for hospitals and ambulatory surgery centers. Health outcome data may include a number of visits, charges, infection rates, mortality rates, etc.

The website features high-quality medical illustrations, photographs, and diagrams. It provides a list of health care facilities, information about insurance, medications, seniors, medical conditions, health care data, and resources for medical care. It also has a variety of consumer publications, and information for health care professionals.

Rate Decrease Approved for Workers' Compensation in Florida

Florida Insurance Commissioner Kevin McCarty announced that he has approved the National Council on Compensation Insurance's (NCCI) amended rate filing for workers' compensation insurance rates. McCarty ordered the NCCI to make an amended filing to reduce the rates of workers' compensation insurance in Florida by 18.4 percent, a further reduction from the originally proposed 16.5 percent decrease. The new rate will become effective Jan. 1.

The final, 18.4 percent reduction is estimated to produce a savings of over $700 million for Florida employers. McCarty had asked the NCCI to amend the filing, citing disagreements with the methodology NCCI used to calculate trend factors. Trend factor incorporate changes in wages, paid losses, and claims frequency.

Prior to the legislative reforms in 2003, Florida consistently ranked No. 1 or No. 2 in the country for the highest workers' compensation rates; however post-reform, Florida has dropped out of the top-10 ranking. This 2008 change could drop Florida as far as the mid-20s, depending on the rate changes in other states.

Are you in the market for Workers' Compensation in Florida? If so, contact us for free, no-obligation quote.