Allstate + Global Warming = Rate Increase

Allstate says that global warming is the reason for their proposed 42% rate hike in Florida.  Global warming?  So, weather predictions from scientists in the global warming arena are being plugged into computer models that Allstate utilizes and that's how they came up with 42%. 

Wow, there are so many things to say and not enough space to type them. 

Let's start from the global warming angle.  There is an incredible study that was done by the Natural Resources Defense Council about the effects of global warming on the state of Florida.  If you are in the camp that believes that global warming is truly an issue, then you will instantly recognize the projected danger that the state is in.  If you are in the camp that believes that the earth is like a big lab that is constantly changing with or without the help of mankind, and that what is happening on earth will keep happening despite our best efforts, the study will mean nothing to you.  In either case, one thing that cannot be denied is that past history has taught us that hurricane frequency works in cycles.  We're currently in an increased frequency cycle that we can expect to continue for the next 25 to 45 years and when that's done, we can expect to go into a cycle of lesser frequency.  Wonder if Allstate will slash rates during that cycle?

On the other side of the country, just last month, Allstate proposed a 9.5% rate increase from its 1 million California policyholders for the benefit of the investing that they have done equaling $82 million over the last 10 years in low income housing and other projects .  But according to Pamela Pressley an attorney for the Foundation for Taxpayer and Consumer Rights, Allstate only invested $15 million during the last 3 (not 10) years of the project and they were already reaping some return on their investment.  Why should policyholders have to pay for a company's benevolence?  When they start receiving a larger return, would that result in a rate decrease for policyholders?  But wait, there's more.  Last July, Allstate stopped issuing new homeowner policies in California because of the risk of expensive payouts due to natural disasters.  I apologize in advance for not having time to research the effects of global warming on earthquakes and the increase of the already rare California hurricane.

I have an idea.  What if Allstate, out of benevolence, and contemporary thinking, starts to invest some of their profit into Florida's Hurricane Grant project and helps all of the low income properties that are not financially capable of bringing their homes and buildings up to current hurricane mitigation standards?  Then, when all of the extra globally warmed hurricanes hit the peninsula, maybe the tallied losses wouldn't be so catastrophic.

Consumers in general are already facing a rough road due to a weakened economy.  Gas prices are outrageous, property taxes, despite the recently passed amendment, will still be high and wages aren't running to catch up.  I'm of the opinion that asking consumers for more money in this environment based on global warming is hot air.

Comments

[Andy]

Since proponents of the Global warming THEORY are in the minority, Allstate has obviously cherry picked the data they are using to validate the increase. The question now is: will the other insurance companies follow suit and lend credence to this rationalized strategy, or maintain current rates and show Allstate for the opportunistic vultures that they are?

[Derek]

Andy, you raise a very good question. Let's hope that the big players don't follow suit. The example that I referenced in California last month had most of the larger insurers cutting rates while Allstate was asking for an increase. So, if that was indicative, we'll have to watch this one play out.

[Dana Graham]

This article is very interesting and disturbing to say the least. I actually had a conversation with a co-worker today in regards to global warming as also Our dependency on Oil, and how in 8 years time be will have depleted our oil reserve. These statistics are frighten to say the least, however with the approaching election, perhaps our next leader will take the necessary steps in preserving our natural resources, so "Hikes" like this won't leave the everyday consumer with out affordable Insurance.

[Derek]

Thanks for your input. Hopefully, we'll manage to elect a leader with some intuition as it relates to the environment. In the meantime, I still think Allstate is jumping the gun on what "could be". Global warming is still a theory at this point and to raise their policyholder rates for something that may happen in the future just doesn't sit right with me. I guess I'm waiting to hear a credible reason to raise already high rates. They've raised rates in California and Texas for completely different reasons yet just as far-fetched. It seems to be a trend that people should be aware of before seeking to do business with them.

[Joe]

My take is a little different then others. I am currently not a Florida resident, but members of my family are. We will never be able to stop the greedy who feed off of the needy. Every large company is itself a bureaucracy created to justify its existence. The same with government agencies such as the VA and others, whether they be local school boards or state agencies such as the turnpike commission. What action has Allstate taken to understand, minimize and prepare for the upcoming doom, that will allow them to "soak" the policyholders of Florida 42% more for liability coverage. Has Allstate reduced wages and benefit costs, CEO and board member bonuses and magic carpet rides into retirement for these folks? I will bet that they have increased over the last ten years. Yes we have a global warming problem that is affecting the weather pattern; the polar ice is melting and the sea levels are rising. Does Allstate consider Florida the epicenter of these anomalies? Or are they taking advantage of the wealthier, older and more vulnerable population base that Florida attracts to feed their bureaucracy? Last but not least, please check this link: http://www.haarp.alaska.edu/.

[Derek]

Joe, well said. Good insight! It's unfortunate that so many good companies out there are overshadowed by the bureaucracy that you highlight. If more companies realized that they could do well by doing good, our world would be a different place. Thank you for your contribution and I look forward to hearing from you again.

[Ben]

Global warming is a reality. The temperature of the Earth is rising. However, what is unknown is the cause and effects this will have on our world and weather. This is where scientists have differed in their explanations, and for Allstate to presume that rising temperatures will cause distruction of buildings is preposterous. It is a game of percentages, but where did they obtain 42%?

"Climate scientists remain divided about the likelihood of the worst-case scenario being realised. James Annan, a British climate scientist who works on the Japanese Earth simulator supercomputer in Yokohama, says the risks of extreme climate sensitivity and catastrophic consequences have been overstated. He is about to publish a study showing that the chance of climate sensitivity exceeding 4.5C is less than 5%. He said: 'It seems to me that some people seem to be talking up the possibility of disaster in order to scare people into doing something.'"

http://www.guardian.co.uk/environment/2006/feb/28/science.frontpagenews

Creating an awareness of global warming, to promote greener cars and lifestyles, is a necessity. Penalizing before the consequence is determined is unlawful.

[Derek]

Ben, interesting perspective. I certainly agree with your assertion that trying to quantify the impact of global warming resulting in an increase of 42% is erroneous and "unlawful" at best. Unless of course Allstate utilized "the stupendous supercomputer" aka "Deep Thought" from The Hitchhiker's Guide To The Universe for the ultimate answer to the ultimate question. "42"!

[Brian Fenimore]

Interesting! Glad my money's NOT with allstate! What are they jealous of big oil? Global warming.... From my understanding that should melt the ice caps... Which makes Kentucky (according to allstate) a new flood zone!