Although Florida has dodged a direct hit by hurricanes the past five years, the company says the increase is needed to cover rising losses for claims unrelated to storms such as sinkholes. The increase comes after the company received approval in 2009 to raise average statewide rates by 28 percent and approval in November to raise them by 6.6 percent.
State Farm had 678,849 residential property insurance policies in the state as of late last year, including 128,506 in Broward, Palm Beach and Miami-Dade counties and 175,084 in the Orlando area.
The Office of Insurance Regulation will review the request at a hearing on Feb. 15. An actuary from the office wrote in an e-mail late Friday that it appears the proposal is driven by higher claims costs and a higher "profit and contingency" factor, which is, in part, for emergencies or unforeseen events. Just because the request was filed "does not necessarily mean the Office will approve it," he wrote.
If approved, some policyholders would see increases that are higher than the state average, and others would see lower increases or even decreases.
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In early 2009, State Farm threatened to leave Florida's property insurance market after the state rejected its request for rate increases of either 47 percent or 67 percent. That year, legislators passed a measure to effectively allow the largest home insurers to charge as much as they wanted, but the legislation was vetoed by Gov. Charlie Crist.
In July 2009, regulators agreed to allow State Farm to eliminate some discounts it had been providing, which resulted in higher rates on average statewide. The company agreed to stay in the state in December 2009 if it was allowed to shed 125,000 policies over several years and raise rates by an average 14.8 percent.
Last year, regulators allowed the company to reduce some discounts it gives homeowners for fortifying their homes against hurricanes, effectively raising statewide average rates by 6.6 percent, said State Farm spokesman Michael Grimes.
Grimes said State Farm, which had reported its premiums weren't keeping pace with claims and other expenses, helped improve its finances by dropping some policies. It now has about 130,000 fewer residential property insurance policies than it did in late 2009 when it agreed to stay in Florida.
The rate increase also would help, Grimes said. "To ensure State Farm Florida has the resources to sufficiently protect its customers' property, the premiums need to adequately reflect the risk inherent in providing property insurance coverage in Florida," he said. "Non-catastrophe loss per policy is up 94 percent the past three years. Much of the insurance losses can be attributed to sinkhole claims."
The company spent $351 million to cover sinkhole claims from 2007 to October 2010, according to Grimes.
Information about the rate hearing is available at the Office of Insurance Regulation's website, floir.com/pcfr/RateHearings.aspx.