Coastal Reflections

Tropical Storm Ernesto may have spared Florida, but it wasn't enough to deter Allstate from proposing double-digit price increases for 370,000 homeowners Wednesday.

Allstate Floridian Insurance, which has 270,000 customers and is the state's third-largest carrier, told regulators it wants to raise rates by 24.2 percent. A second Allstate company, Allstate Floridian Indemnity, asked for permission to raise rates by 33.6 percent statewide.

The rate requests, while not linked specifically to Ernesto, are related to Florida's new reality of more frequent and powerful hurricanes, Allstate spokesman Ryan Priest said. "They're directly related to the extensive hurricane risk Florida faces," Priest said.

He also pointed to the rising costs of reinsurance, the coverage carriers buy to protect themselves from catastrophic losses.

The price increases come even as Northbrook, Ill.-based Allstate reports strong profits. Last month, the carrier said it made $1.2 billion in the second quarter. Shares of the public company (NYSE: ALL) closed Wednesday at $57.64.

"This was a very strong quarter for Allstate driven by excellent performance of our automobile insurance line of business," Edward Liddy, chairman and chief executive, said in a statement at the time. "Overall, we are growing our business and generating strong profitability while at the same time we are managing down our exposure to catastrophes in the lines of business and areas of the country where the risk is the greatest."

Allstate's latest rate hike request comes seven months after it was granted a double-digit increase in the state. In January, state regulators let Allstate Floridian Insurance boost rates by 16.3 percent, while Allstate Floridian Indemnity raised rates by 24.4 percent. If the Florida Office of Insurance Regulation approves the latest proposed increases, they would take effect in December, Priest said.

Two state politicians from both sides of the aisle decried the proposed increase as one more hit for battered homeowners.

"This is just another example of consumers in Florida getting hurt," said state Sen. Ron Klein, D-Delray Beach.

State Rep. Randy Johnson, R-Celebration, a candidate for chief financial officer of Florida, criticized Allstate for seeking a second rate hike this year even after dropping thousands of policies.

"This is what Florida families have to look forward to: the constant, piecemeal picking away of their disposable income by insurance companies," he said.

Allstate stopped writing new policies in Florida in 2004, and it said in May that it would offload 120,000 homeowners policies to a start-up, Royal Palm Insurance. Its decision to cut its risk in hurricane-prone states followed last year's Hurricane Katrina. In the third quarter of 2005, Allstate lost $1.6 billion after Katrina devastated the Gulf Coast.

Allstate is only the most recent carrier to ask for a double-digit rate hike. State Farm Florida Insurance Co., the state's largest private insurer, recently won a 52.7 percent increase. Nationwide Insurance is seeking a 71.4 percent hike, while USAA wants a 40 percent boost in rates.

In an article in the Sept. 4 issue of Fortune magazine, Allstate's chairman said rates in Florida aren't high enough to offset the risks of doing business in the state, particularly as warmer weather, a growing population and rising home values promise to make hurricane damage costlier than ever.

"If you talk to someone in Florida, they say, 'Boy, in the last five years, my home has gone up 80 percent in value,' " Liddy told the magazine. "But if you ask them, 'Well, are you paying 80 percent more for your insurance?' they would say, 'Oh, no. I only want to pay 8 percent more.' There's a disconnect."

Meanwhile, state officials are looking for ways to keep carriers like Allstate from fleeing the state. Gov. Jeb Bush appointed a commission to study property insurance, and he has said he might call state lawmakers into a special session to address insurance sometime after next week's primary election.

Both Johnson and Klein criticized an insurance reform package approved by the Republican-dominated legislature in May.

"When the insurance industry writes the insurance bill, they end up sticking it to consumers," Klein said.