NorthJersey.com

Allstate Seeks 15.4% Hike In N.J.

The Record (NorthJersey.com) — Tuesday, February 3, 2009

BY RICHARD NEWMAN
STAFF WRITER

Allstate New Jersey Insurance Co., the state's third-largest auto insurer by premium dollars, has asked the state for permission to raise rates by 15.4 percent on average to cover the higher cost of car repairs, lawsuits and medical care, the company said.

The request filed Jan. 23 is the largest ever by the company, which covers nearly 700,000 vehicles in the state, company spokesman Walter Tomasheski acknowledged. The company, which is sending letters to policyholders in 300,000 households, issued a press release announcing the request on Friday. The New Jersey Department of Banking and Insurance, which is reviewing the request, has 90 days to respond.

"Allstate is paying more in claims than it is collecting in premiums," Tomasheski said in a telephone interview.

Insurance rates are a sore subject for New Jersey drivers who pay among the highest rates in the country. After State Farm and American International Group threatened to leave the state earlier in the decade, auto insurance regulations were relaxed in 2003, prompting more competition from discount underwriters. Geico, which is part of Warren Buffet's Berkshire Hathaway conglomerate, began selling auto insurance here in 2004, and Progressive Insurance came a couple years later. It's unclear if rates have come down as a result.

A rate increase of the size Allstate is requesting is "absolutely unconscionable," said Phyllis Salowe-Kaye, executive director of consumer watchdog New Jersey Citizen Action. "The state should take a really hard look at this request," she said.

Parent company Allstate Insurance Co. — which posted a fourth-quarter loss of $1.13 billion last week — does not break out results for the New Jersey subsidiary.

Marshall McKnight, a spokesman for the New Jersey Department of Banking and Insurance, said carriers have to show rate increases are reasonable. Also, they must demonstrate they can bring in enough money for the insurer's financial well-being. Requests for increases of more than 7 percent must also be reviewed by the state's public advocate, he said.

Rate-increase requests from seven other insurers are pending before the department. They range in size from an increase of 9 percent requested by Encompass Insurance Co. of New Jersey — which also is a subsidiary of Allstate Insurance Co. — to Founders Insurance Co.'s modest request that would result in virtually no net increase in average premiums.

American International Insurance Co. of Delaware, a subsidiary of troubled insurance giant American International Group, is requesting a 7 percent hike.

Allstate Insurance Co. was the biggest auto insurer in the state with $882 million in written premiums as of the end of 2007, the latest figures available from the state.

Tomasheski said Allstate is trying to control costs in New Jersey by suing an alleged fraudster. In December, the company filed a $24 million suit against a Perth Amboy owner of health care facilities where fraudulent claims allegedly originated.

If approved, individual policy rate changes will vary, and changes will take effect when policies are renewed. New customers who took out polices since September 2006 will not be affected by the proposed increase.

In the letter, the insurer suggested ways customers can reduce premiums, such as changing deductible amounts and coverage limits.

If Allstate is successful, the increase will prompt customers to shop around for better deals, said Magdalena Padilla, president of the Insurance Council of New Jersey, a trade group.

"This will stir the competition in the marketplace," she said.

Allstate New Jersey Insurance Co., the state's third-largest auto insurer by premium dollars, has asked the state for permission to raise rates by 15.4 percent on average to cover the higher cost of car repairs, lawsuits and medical care, the company said.

The request filed Jan. 23 is the largest ever by the company, which covers nearly 700,000 vehicles in the state, company spokesman Walter Tomasheski acknowledged. The company, which is sending letters to policyholders in 300,000 households, issued a press release announcing the request on Friday. The New Jersey Department of Banking and Insurance, which is reviewing the request, has 90 days to respond.

"Allstate is paying more in claims than it is collecting in premiums," Tomasheski said in a telephone interview.

Insurance rates are a sore subject for New Jersey drivers who pay among the highest rates in the country. After State Farm and American International Group threatened to leave the state earlier in the decade, auto insurance regulations were relaxed in 2003, prompting more competition from discount underwriters. Geico, which is part of Warren Buffet's Berkshire Hathaway conglomerate, began selling auto insurance here in 2004, and Progressive Insurance came a couple years later. It's unclear if rates have come down as a result.

A rate increase of the size Allstate is requesting is "absolutely unconscionable," said Phyllis Salowe-Kaye, executive director of consumer watchdog New Jersey Citizen Action. "The state should take a really hard look at this request," she said.

Parent company Allstate Insurance Co. — which posted a fourth-quarter loss of $1.13 billion last week — does not break out results for the New Jersey subsidiary.

Marshall McKnight, a spokesman for the New Jersey Department of Banking and Insurance, said carriers have to show rate increases are reasonable. Also, they must demonstrate they can bring in enough money for the insurer's financial well-being. Requests for increases of more than 7 percent must also be reviewed by the state's public advocate, he said.

Rate-increase requests from seven other insurers are pending before the department. They range in size from an increase of 9 percent requested by Encompass Insurance Co. of New Jersey — which also is a subsidiary of Allstate Insurance Co. — to Founders Insurance Co.'s modest request that would result in virtually no net increase in average premiums.

American International Insurance Co. of Delaware, a subsidiary of troubled insurance giant American International Group, is requesting a 7 percent hike.

Allstate Insurance Co. was the biggest auto insurer in the state with $882 million in written premiums as of the end of 2007, the latest figures available from the state.

Tomasheski said Allstate is trying to control costs in New Jersey by suing an alleged fraudster. In December, the company filed a $24 million suit against a Perth Amboy owner of health care facilities where fraudulent claims allegedly originated.

If approved, individual policy rate changes will vary, and changes will take effect when policies are renewed. New customers who took out polices since September 2006 will not be affected by the proposed increase.

In the letter, the insurer suggested ways customers can reduce premiums, such as changing deductible amounts and coverage limits.

If Allstate is successful, the increase will prompt customers to shop around for better deals, said Magdalena Padilla, president of the Insurance Council of New Jersey, a trade group.

"This will stir the competition in the marketplace," she said.

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