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Saturday, August 30, 1997

Allstate refunding $42.7 million

By MICHAEL HOLMES / Associated Press Writer

AUSTIN (AP) -- An estimated 750,000 consumers will receive $42.7 million from three Allstate insurance companies in the largest refund ever ordered by the Texas Department of Insurance against an automobile insurer.

Insurance Commissioner Elton Bomer signed the agreement Friday, ordering refunds for consumers allegedly overcharged for auto liability policies.

"I'm pleased that Allstate agreed to end this controversy by reducing its rates and refunding the amounts its policyholders were overcharged," Bomer said.

"I want the industry to understand clearly that the Texas Department of Insurance will be challenging rate filings which are not accurate or in compliance with the law," he said.

The refunds will range from $5 to $100, depending on the amount of premiums paid and duration of the coverage.

Customers will receive refunds either as checks or as credits against premiums for current or renewal policies. Former policyholders will receive checks.

Allstate is the state's second-largest personal auto insurance company, with approximately 14 percent of the market, said Sharon Cooper, the company's Dallas-based Texas spokesperson.

The action affects customers of Allstate Insurance Company, Allstate Indemnity, and Allstate Property & Casualty purchasing auto insurance policies between June 30, 1995 and Sept. 8, 1997. In agreeing to the order, Allstate denied any violation of state insurance laws.

"Allstate believes this settlement is in the best interest of our customers, employees and shareholders," said Ms. Cooper.

"It is a clear example of why differences between insurance companies and regulators should be resolved within the (insurance department) and not through costly, unnecessary litigation. The settlement represents Allstate's strong commitment to work with TDI on issues that arise in the normal course of business," she said.

Friday's order ended a case that began when the department found what it said were discrepancies in auto liability rates filed by Allstate in 1995 and 1996.

The agency charged that the rates were excessive for several reasons, including a built-in subsidy for auto liability policies the Allstate companies issued to participants in the state's high-risk plan, and use of a smaller tort reform rate reduction factor than required by insurance department rules.

Rod Bordelon, the state's Public Insurance Counsel who represents consumers, praised the agreement.

"We simply thought it was appropriate to refund the money to the policyholders. After all, if they were overcharged, it's their money," he said.

Allstate filed acceptable new rates effective Sept. 8, the insurance department said.

In their new rate filing, the three companies offered the optional 10 percent good student and student-away-at-school discounts, which they hadn't previously made available, officials said. Those discounts weren't part of the settlement, Ms. Cooper said.