State Farm to reduce homeowner rates by 9%
The state's largest private home insurer agreed to cut rates by an average of 9 percent.
10/03/2007 3:01 AM
10/04/2007 10:53 AM
State Farm of Florida, the largest private insurer of homes in Florida, agreed to lower homeowner rates by an average of 9 percent statewide in order to comply with a law passed in January.
Officials estimate the rate cut will save its more than one million State Farm policyholders about $23 million.
State Farm said the rate decrease would be effective ''as soon as practical,'' and customers would see their rates drop when they renew.
As part of a broader agreement with state regulators, State Farm also resolved several issues regulators had raised recently, including the company's current plans for reducing the number of its windstorm policies and how it applies multiline discounts to auto policyholders.
State Farm said earlier this year it is dropping 50,000 home insurance policies, mostly along the coast. At that time, the company said one of the factors that would determine whether it renewed a home policy was whether the customer had other State Farm coverage, such as car insurance. The company still plans to drop policies along the coast, but said that as part of the deal with the state, it won't take into account what other policies customers have.
State Farm also agreed to refund extra money it had mistakenly collected as part of an assessment charged to all homeowners insurance policyholders in the state to make up a shortfall in Citizens Property Insurance, the state-run insurance pool. State Farm will refund $23 million to policyholders beginning in six months. The refund will include 5 percent simple interest.
The settlement also resolves an investigation by the Florida attorney general and Office of Insurance Regulation involving State Farm's failure to automatically notify eligible auto policyholders they can transfer from more expensive policies with one company to lower-cost policies in the other company.
Regulators believe there are approximately 200,000 Florida policyholders with State Farm Fire and Casualty. By moving eligible customers to State Farm Mutual Automobile Insurance, State Farm estimates 35,000 people will save $100 to $200 per year.
State Farm officials said they hoped the settlement represented a cooling of tensions between the insurance giant and state regulators and politicians.
''State Farm wants to be part of the solution for our customers, the state and our company,'' said Joe Formusa, president of State Farm Florida.
The massive insurance bill expanded the Florida Hurricane Catastrophe Fund to offer cheaper back-up insurance for companies selling homeowners coverage in Florida. Insurers were required to pass on the savings to policyholders if they tapped the CAT fund.
A DOSE OF REALITY
In March, insurers filed estimated rates based on their expected reinsurance purchases. Monday was the deadline for insurers to file revised rates based on actual reinsurance.
State Farm originally had filed a 7 percent reduction. The company repeatedly told state officials the savings it could pass on wouldn't be as high as the average 24 percent reductions some lawmakers and Gov. Charlie Crist expected because it didn't buy much back-up coverage in the private market.
However, Office of Insurance Regulation actuaries objected to the original filing because they felt the company could have put in a larger rate cut based on the reinsurance costs it noted in the filing.
The Associated Press contributed to this report.
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