In the wake of a press conference where Florida Gov. Charlie Crist called the insurance industry “greedy” and “tenacious,” and claimed that the state has “significant reason to believe that some insurance companies are violating Florida law,” Florida insurance regulators issued subpoenas against Allstate Corp. and 10 of its subsidiaries--Allstate Floridian Indemnity Co., Allstate Floridian Insurance Co., Allstate Fire and Casualty Insurance Co., Allstate Indemnity Co., Allstate Insurance Co., Allstate Property & Casualty Insurance Co., Encompass Floridian Indemnity Co., Encompass Floridian Insurance Co., Encompass Indemnity Co. and Encompass Insurance Company of America.

Together, these companies make up 7.9 percent of Florida's residential property market and write more than 394,000 policies in the state.

The subpoenas seek testimony about Allstate’s reinsurance costs. They also seek testimony about Allstate’s relationships with risk modeling companies, rating companies and industry trade associations. Each insurer is also directed to present all relevant documents to supplement its testimony.

The subpoenas are part of an ongoing probe into whether insurers are colluding to hamper ongoing legislative and regulatory efforts to slash homeowners insurance rates in Florida.

Allstate Floridian Indemnity and Allstate Floridian Insurance seek rate increases of 28.3 percent and 41.9 percent, respectively.  Encompass Floridian Indemnity and Encompass Floridian Insurance are requesting increases of 38.4 and 39.7 percent, respectively.  Crist called the rate increase requests "outrageous" and vowed that the state would continue to press insurers for savings.

A state insurance reform bill passed in January expanded the Florida Hurricane Catastrophe Fund to allow insurers to buy additional reinsurance at a lower price than in the private reinsurance market.  The insurers are statutorily required by law to pass on the savings to policyholders in the form of lower premium rates.

"The legislation enacted in January was very specific about its requirement that insurers reduce the rates they are charging for homeowners insurance," Insurance Commissioner Kevin McCarty said.  "We are continuing to investigate those companies that appear to be ignoring the intent of the legislature in its efforts to reduce premiums to consumers, and we want to hear the reasons behind those companies' actions."
 
The insurance industry strongly opposes these developments. Some analysts argue that the new laws dampen free-market forces by imposing artificially low premiums and straitjacketing the way insurers can do business. Industry groups claim that the way to maintain a functional insurance market for all participants is to maintain underwriting freedom.

Will Florida’s no-nonsense approach eventually give consumers the low-cost property insurance coverage for which they are clamoring, or will a succession of rate freezes and regulatory witch hunts force insurers to abandon the Florida market completely?