Md. fines Allstate $750,000

State insurance regulator lists variety of failures

December 21, 2007|By Laura Smitherman | Laura Smitherman,SUN REPORTER

The Maryland Insurance Administration fined Allstate Corp. and its affiliates $750,000 - the largest penalty ever from the regulatory agency - for failing to give tens of thousands of consumers proper notice about their policies, not making required filings with the state, and miscalculating some premiums.

Regulators, in announcing the penalty yesterday, said the company has exhibited a pattern of violating state laws regarding consumer notifications. The violations involved the company and its affiliates under the Encompass brand. Allstate ranks as one of the top insurers in Maryland.

"Consumers have basic rights to be informed about their coverage and changes that the insurer may make," said Insurance Commissioner Ralph S. Tyler in a statement. "Otherwise, there is no reasonable way for them to make informed decisions about what coverage they need and what company can best provide it."

Allstate officials said they have corrected the problems that involved its homeowner and auto insurance policyholders and made the necessary refunds. Spokeswoman Debbie Pickford said the company would comply with any new state laws. Several of the violations related to changes in insurance regulations by the General Assembly in recent years. "We underestimated the amount of time and resources needed to put the new notices into effect and sincerely regret the oversights associated with the filings," Pickford said. She added that the company consented to the fine.

Allstate has had several run-ins with Maryland regulators in recent months. Late last year, the insurance administration fined the company $100,000 and ordered it to return $18 million to policyholders who had been improperly notified of higher premiums stemming from accidents or speeding tickets.

This year, Allstate faced questions from regulators and state lawmakers about its decision to stop writing new homeowner policies in Maryland coastal areas. The company said that it needed to reduce its risk and noted warnings by scientists that a warmer Atlantic Ocean may lead to more intense hurricanes hitting the Northeast.

The insurance administration approved Allstate's decision, but the People's Insurance Counsel, a consumer advocate division of the attorney general's office, objected to that determination. The administration recently held a hearing an the matter and is expected to render a decision within weeks.

In the case announced yesterday, regulators said Allstate renewal notices didn't include the amount of the previous premium and the new premium, so that consumers could compare the two. In some instances, the company didn't provide policyholders with the required annual statement summarizing their coverage.

As a result of a programming error, the company also miscalculated premiums based on the hurricane deductible selected on policies issued over a five-year period. It has since refunded about $6,000 to the 2,800 policyholders affected.

In another violation, the company removed earthquake coverage from some existing policies without first filing the appropriate paperwork with the state.

P. Todd Cioni, associate commissioner at the insurance administration, said other insurers were able to comply with the frequent changes made to the insurance code.

"Allstate was put on advance notice of the effective date of these laws. The statutory process in Maryland doesn't just sneak up on you," he said. "This is unacceptable."

laura.smitherman@baltsun.com

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