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Date of Issue: April 12, 2007

Insurance: 'Dumped at the altar' by Allstate

insurance gretchen.jpg
Island homeowners Gretchen and Bud Edgren are among the estimated 400,000 Florida policyholders who are losing their Allstate insurance policy and facing higher premiums with another insurer. Islander Photo: Molly McCartney

Meet Gretchen and Bud Edgren, who are among the latest victims of Allstate's decision to slash the number of its Florida residential policyholders in half.

 The Edgrens are year-'round residents of Holmes Beach who live in a masonry house protected with storm shutters and galvanized panels. They are located more than two blocks from the Gulf beach. In the 20 years they've had Allstate coverage, they've never filed a claim.

"I feel like I've been dumped at the altar," Gretchen Edgren said.

A new policy with a new company is going to cost the Edgrens nearly $3,200, about one-third more than the $2,352 they paid last year and three times what they paid in 2005.

Gretchen said the non-renewal notice from Allstate "didn't surprise me particularly," given the state's ongoing insurance crisis and announcements Allstate has made about its plans.

"We knew they were scuttling people," she said.

The Edgrens said they feel they are better off than many others, "based on the horror stories we've heard." And they said the secretary for their insurance agent had been especially helpful. But their overall experience with Allstate has raised some serious questions in their minds about the workings of the state insurance system and the promises of state efforts to fix the market.

Many questions, few good answers

Q: Since they lost their Allstate policy and they will have to pay more for coverage with another company, are they eligible for coverage from Citizens Property Insurance Corp.?

A: Under the new insurance law, the Edgrens could switch to Citizens if the premium they are being offered by the other company is 25 percent or greater than the Citizens premium, according to spokesman Rocky Scott.

Q: Is it possible, after receiving a non-renewal notice from Allstate, to be reinstated with Allstate?

Gretchen said she had heard of a case where Allstate was "forced" to reinstate a policyholder who received a non-renewal notice after the policyholder complained to state insurance regulators. If that had happened, Gretchen said, "how exactly" should she complain so that she also can get a renewal policy with Allstate?

A: Insurance experts say there was a time earlier this year when insurers were under a state order prohibiting them from canceling or non-renewing policies. So it is possible that someone who was non-renewed in that period would be able to get the policy reinstated and renewed by complaining to the Florida Office of Insurance Regulation, officials said.

However, the emergency rule permitted insurers to go forward with non-renewal and cancellation notices as soon as they filed new rate schedules that complied with the state's insurance law. Among other things, the new rates must reflect the premium savings that insurers realize from purchasing reinsurance from the state rather than the private market.

Allstate complied with the requirements by filing new rates for the policyholders it is keeping. Those policyholders are supposed to benefit from an average statewide savings of 14 percent on their premiums. But policyholders like the Edgrens won't get a rate reduction because they won't have Allstate coverage.

Q: What exactly is Allstate doing?

A: Allstate spokesman Adam Shores told The Islander last week that his company is in the midst of a program designed to cut the number of Florida policyholders from 750,000 in 2005 to about half that number by 2008.

 "Once we finish, by next April, we will be down to 350,000 to 400,000 policyholders," he said.

Shores said the cutbacks are intended to reduce the company's risk exposure and put it "in the position where we are stable and strong."

At present, the company is writing new policies for automobiles and life insurance. "But we are not writing any new residential business," he said.

Shores said that Allstate "sympathizes with our customers and has tried to come up with solutions. We don't want to say we are done with you and go to Citizens. We are looking for ways to bring capital into the marketplace."

Q: Allstate has been steering customers to the Royal Palm Insurance Company for coverage. What is Royal Palm Insurance and what is its background?

A: In its non-renewal notice to the Edgrens, Allstate said: "Because we want to help you find a replacement property policy, Allstate Floridian and your Allstate Floridian agent have arranged for another insurance company, Royal Palm, to offer you property insurance for your next policy period."

Allstate spokesman Adam Shores said Royal Palm is a separate company. He said the founder of Royal Palm is Locke Burt, a former member of the Florida Senate, who once chaired the Senate's insurance committee.

"This company best suited our needs, so we went into a contract with them last year to assume a portion of our business," Shores said.

Royal Palm is described on its Web site as a privately held company headquartered in Ormond Beach. The company was founded "to fill in the gaps created as insurance carriers reduce the amount of business they write in the state," according to its Web site.

Q: Allstate says it has no connection to Royal Palm, but Allstate agents are selling Royal Palm policies. What's going on?

A: The Allstate spokesman said Allstate agents are independent business owners who have a contract to sell Allstate insurance products. Allstate agents also can sell Royal Palm insurance because of a contract arrangement between the two companies.

"This is a common thing across the industry," said Shores, the Allstate spokesman.

Q: What is the difference between Allstate Floridian Insurance and Allstate national?

A: Allstate Floridian is one of Florida's four insurance "pup" companies set up after Hurricane Andrew in 1992. State Farm, Nationwide and Travelers operate the other three "pups."

"What came out of Hurricane Andrew was a devastation that almost brought the Allstate [national] company to its knees," Shores said. "So the decision was made to have our business operate just through Florida."

As part of that decision, Allstate separated its Florida operation and its losses from the mother company.

In his run for governor last year, Charlie Crist told voters he would fight to eliminate the insurance "pup" companies on the premise that having Florida policyholders as part of a national company would help spread the risk and lower rates. An anti-pup proposal was considered and rejected by the Florida Legislature during its special session on insurance earlier this year.

"There has been a lot of criticism of the ‘pups,'" Shores said, "but if you look at it from a national perspective, our company, Allstate Floridian, was set up so that the rest of our customers across the nation would be protected from what may or may not happen in Florida."

Garden tour insurance doubled

The price for six hours of liability coverage for this year's Anna Maria Island garden tour soared to $886-more than twice the cost for last year's coverage, according to the tour sponsors.

Karen Lockwood, who co-chaired the tour with Jennie Pickwick, said the cost of the insurance hurt this year's fund-raising effort by the Anna Maria Island Community Chorus and Orchestra.

"For the past two years, we paid around $400 for a liability policy, in case someone on the tour slips and falls and tries to sue AMICCO," Lockwood said.

She said the group's insurance agent shopped without success to find a cheaper rate this year. "Nobody was any lower than the $886," Lockwood said.

This year's tour of five private gardens raised a net of $7,300 for AMICCO. That included ticket sales and sponsorship dollars.

Note: If you have an insurance story to share with others about your experience with rate hikes, rate reductions, rate refunds or other insurance issues, please send a note to The Islander by emailing msmccartney@sprintmail.com.

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