This story from the Insurance Journal says Florida regulators have issued subpoenas to Allstate requiring company officials to show up to be grilled at a January public hearing:
The subpoenas direct the Allstate companies . . . to testify regarding the companies’ reinsurance costs and their relationships to risk modeling companies, insurance rating organizations or insurance trade associations.
Gov. Charlie Crist and Insurance Commissioner Kevin McCarty announced the action at a news conference at which they questioned whether Allstate was living up to "the spirit and the letter" of a state law that requires insurers to pass along savings on reinsurance to the public.
What do you think this is, a "Hooding" of Allstate? I refer, of course, to the pressure Mississippi AG Jim Hood brought to bear on insurers after Katrina hit, with his grand jury and criminal investigation of insurer claims practices. Curiously, no indictments came of it, but his tactics appear to me nevertheless to have had a substantial effect — along with some adverse court rulings — in creating an atmosphere where insurers found it conducive to settle litigation and re-evaluate closed claims.
In addition to the usual spewing done by Gov. Charlie Crist, Florida officials have been threatening insures with investigations into potential collusion between insurers, trade associations and rating organizations, all stemming from the fact that insurers have not dropped property insurance rates as Florida officials expected and claim insurers promised. Instead, most insurers have filed for rate increases. Regulators have not been without their successes, however: State Farm recently agreed to increase its rate reduction from 7 percent to 9 percent, refund to policyholders some $23 million in surcharges and pay the state’s legal bills of $1.5 million.
Are Florida officials on to something? Have insurers engaged in illegal collusion? Me, I doubt it, because there is a much simpler explanation for what is going on — Florida officials are denying the reality of risk in insuring Florida property, and think they can central plan and threaten their way out of the state’s insurance mess. But, who knows? As Sam Friedman points out, who would have expected that some major insurers were conspiring with large brokers to fix prices?