OAKLAND, Calif. (AP) _ Allstate Insurance Co. will pay $750,000 to settle charges levied by the state insurance commissioner that it treated some policyholders unfairly after the Oakland fire.

In return, Commissioner John Garamendi said Tuesday he is dropping charges against seven of the eight agents he previously accused of creating confusion about terms and benefits of insurance policies.

The eighth agent, Charles A. Strahan, is being fined $250,000, which Allstate is paying, bringing the total fine to $1 million, said spokesman Dick Donegan. Strahan's license will be suspended 18 months, but 15 months of that will be probation.

Allstate was accused of delaying final replacement cost offers to some customers following the Oct. 20, 1991, fire that killed 25 people and damaged or destroyed nearly 3,000 homes.

In a statement released by Garamendi's office, Allstate Senior Vice President Robert Pike said the company had since made changes in the way it handles catastrophe claims.

Allstate had nearly 600 claims from the fire and all but 23 are settled, Pike said.

Under the settlement, Allstate will tell customers the procedures for settling claims, particularly catastrophic claims, and provide written guidelines upon notice of claims. The company has also agreed to provide supplemental sales training to all of its California agents.