Georgia Insurance Commissioner Ralph Hudgens issued a rare “consumer alert” earlier this year when Allstate Insurance filed plans to raise auto coverage rates an average of 25 percent.
On Wednesday, he said there is nothing he can do about the new rates, which took effect in May.
Hudgens’ office did an examination of the rate filing by Georgia’s second-largest auto insurer, but the commissioner told The Atlanta Journal-Constitution that his hands are tied by a state law that makes it almost impossible to stop such increases.
Hudgens said he fears Allstate’s filings will be the first of many by insurance companies who now see that the insurance commissioner’s office is largely powerless to stop big rate hikes.
“I am afraid the floodgates are just going to open, that they are going to say, ‘Allstate got away with it, so we’re going to do it, too,’ ” he said.
While the average Allstate rate rose 25 percent, Hudgens said some policyholders saw increases of more than 50 percent.
At the end of 2015, Allstate had 11 percent of the auto insurance market in Georgia, making it the second-largest insurer behind State Farm.
Hudgens directed his staff to initiate a “professional level examination” of the Allstate filing to determine whether the rate increase could be defended. If Allstate’s rate increase was deemed “excessive,” Hudgens said in April, he intended to act.
However, the commissioner now says state law got in the way of him doing anything about it.
Hudgens is a former state senator, and with his support in 2008 the General Assembly changed the law so that insurance companies could start using new rates without prior approval of the insurance commissioner’s office. Before that, commissioners had to approve increases before companies could start charging new rates.
The insurance industry pushed the law change, and then-Insurance Commissioner John Oxendine warned that it would lead to a spike in auto insurance rates.
Hudgens said under state law, he can only stop rate hikes if he determines that new rates are unreasonably high and that “a reasonable degree of competition does not exist.”
That “competition” provision is a difficult hurdle to overcome in Georgia, where Hudgens said 226 companies sell auto insurance.
The commissioner said his office looked closely at Allstate’s rate filings, but “we found out in actuality, there wasn’t anything we could do about it.”
“We felt that if we stopped this,” he said, “Allstate would take it all the way to court and we would lose in court.”
Adam Polak of Allstate said: “Our agreement with the Georgia Department of Insurance recognizes the need to create a stable rate environment for consumers. We adjust rates very carefully to charge properly for the risk we assume and ensure our ability to help protect customers from life’s uncertainties.”
Polak said the rate changes affected just under half of Allstate’s customers in the state, and that they reflect a significant increase in claims costs in Georgia. The company said costs have risen because of an increase in both accidents and settlements paid out from those accidents.
“Increases in miles driven on Georgia roads, distracted driving, higher speed limits and cars that are more expensive to repair or replace are driving costs up for the entire industry,” he said.
Hudgens said the state got a “gentleman’s agreement” from Allstate not to file another rate hike for a year.
The Allstate filings may spark a fight in the 2017 General Assembly session. Hudgens promised to meet with top legislators to get the law changed so the state can fight such rate hikes.
“We are going to modify how this law is written,” Hudgens said.
The issue of rising auto insurance costs is on the radar of lawmakers. House Insurance Committee Chairman Richard Smith, R-Columbus, has already made plans to hold a hearing on the subject on the first Wednesday of the 2017 session, which begins Jan. 9.