[UPDATE] State Farm Questioned Over Rate Request

By: Michael Peltier, The News Service of Florida; AP Email
By: Michael Peltier, The News Service of Florida; AP Email

[UPDATE] 2-16 8:45AM --

State Farm property policyholders in higher risk areas could see premium increases of 40 percent or more on their homes under a 27.9 percent average rate hike request that insurance officials said Tuesday will shock many customers and place an increased burden on the state-run pool.

State Farm Florida Insurance, the state’s largest private insurer of property, told state regulators Tuesday that non-hurricane losses -- especially sinkhole claims-- over the past few years are forcing the company to double rates for rental customers and seek hefty hikes from homeowners in some inland counties to cover the losses.

But the state’s insurance Consumer Advocate, Steven Alexander, said the request is bloated. State Farm is paying its agents far more than the national average for policies and is skimping when it comes to providing discounts to property insurance customers when it drops sinkhole coverage as part of its basic multi-peril package and offers it instead as an optional add-on, he said.

Speaking during a public hearing on its latest rate increase request, State Farm representatives said sinkhole losses over the past couple of years have escalated dramatically and have been the major driver in ramping up losses for the company, which has not seen a hurricane hit land in Florida since Hurricane Wilma in 2005.

“Our financial position has deteriorated over the past few years,” said State Farm actuary Adam Swope. “This company has lost a substantial amount of surplus despite having no hurricanes.”

State Farm is requesting a 27.9 statewide increase in residential homeowners’ rates. Premiums for rental insurance, a relatively small percentage of the company’s portfolio, would increase 95.7 percent if the rates are approved. Officials at the Office of Insurance Regulation say they will likely have a ruling within the next two weeks.

As part of the statewide average, policyholders in some counties would see increases that are significantly higher.

Policyholders in Orange and Seminole counties for example, would see premiums jump more than 46 percent if the request is approved. Customers in other locations would see rates fall, with policyholders in Manatee County paying 6.7 percent less and Panhandle customers seeing 20 percent reductions.

Sarasota County policyholders would see a 2.5 percent increase, while rates in Charlotte County would rise 16.5 percent.

One likely offshoot of the rate hikes is that more policyholders will be transferred into Citizens Property Insurance Corp. the state-run pool that is now the largest single property insurer in Florida. State regulators Tuesday appeared skeptical when company staffers were unable to determine how many policyholders would leave State Farm if the rates were approved. They asked why the rates were not being phased in to cushion the blow.

“Has the company told its agents what to tell customers if these rates are approved?” asked OIR Acting General Counsel Belinda Miller. “Some of them are going to be shocked.”

Alexander, the consumer advocate, said State Farm could lower costs by not paying its agents so much for renewing policies. The company’s selling expenses are more than double the national average of $149 per policy. Alexander also estimated that the company is saving about $325 per policy by not offering comprehensive sinkhole coverage, yet it is offering discounts to customers of only about $150.

Company officials said they have not broken out the sinkhole component among a list of non-hurricane damages from which it has suffered losses, a lack of information that Alexander and other panel members said they would like to see before making up their minds on whether to approve the request.

“We shouldn’t pass on this rate until we get the sinkhole figures,” Alexander urged. “It’s such a big part of the filing.”


UPDATED 2-15 6:05pm

Insurance giant State Farm is once again requesting to increase homeowners' premiums.

Representatives from State Farm Florida went before Florida insurance regulators Tuesday afternoon.

State Farm is seeking a hike of nearly 28 percent in homeowners policies and an increase of almost 96 percent for coverage that protects against multiple perils for businesses and homes or combines property and liability coverage in one policy.

Acting General Counsel Belinda Miller said, "They have to give us the numbers that show that those rates are necessary. So, they have to show us what their prior losses have been, they show us the model hurricane losses and that's really the biggest piece of most rate filings."

State Farm representatives say that losses in sinkhole claims -- which are approaching two billion dollars over the past five year -- were a big part of its rate request.

Miller says the regulation office will make a decision in the next couple of weeks.


FORT LAUDERDALE, Fla. (AP) -- The state's largest private property insurer wants to hike rates by an average of 28 percent.

State Farm Florida Insurance says premiums need to go up to cover the risk in the state.

Florida has dodged a direct hit by hurricanes for the past five years, but the company says it's suffered a spike in non-catastrophic claims, including hundreds of millions of dollars in losses due to sinkholes.

State Farm received approval for a 28 percent increase in the average policy in 2009 and another 6.6 percent increase last year.
It covers nearly 700,000 homes.

The rate request goes before the Office of Insurance Regulation
on Feb. 15.

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  • by Anonymous on Feb 16, 2011 at 02:00 PM
    spectremustang, Doing this means that the low risk of hurricane damage from living in Atlanta, will be increased to help cover the people living along the coast. This does not make sense to me. People in Michigan shouldn't have to pay more because a hurricane hits South Florida. Same thing for me in Tallahassee. I had no damage from hurricanes in 2004, but I am paying higher premiums because someone else did have damage. This is not fair. Maybe Hurricanes and sink holes are the primary driver of higher rates.
  • by robert stroud on Feb 16, 2011 at 01:55 PM
    i had been with state farm for years until i received one of their mailers from the president who was apologizing for my rate increase. he stated that his number one priority was to the shareholders and not the consumer - guess what he lost a consumer and it was a great decision.
  • by Anonymous on Feb 16, 2011 at 08:34 AM
    If you guys will read the article there will be a decrease of about 20% in our area!!!! 6.8% in areas close to us, The biggest increase will be down south because of the insureds have filed way too many claims because of a cracked driveway which they say was caused from a sink hole!!! comeon people!!!!
  • by spectremustang Location: tallahassee on Feb 16, 2011 at 07:00 AM
    The legislature need to pass a law that rates need to be fixed against the national risk assessment. State Farm need to get rid of the holding company that only looks at Florida as a stand-alone. This is the primary driver of higher rates in Florida.
  • by Ed Location: Tallahassee on Feb 16, 2011 at 06:10 AM
    Snake Farm.
  • by Anonymous Location: Crawfordville on Feb 16, 2011 at 05:20 AM
    I had been insured by State Farm for 18 years until I changed to another a month ago and reduced my premium in half!! I had always been told within the last few years that if you have insurance it is better to hold onto it since it is hard to get but have found otherwise. So my advice is check the local independent agencies that are able to get mutiple quotes. Also, if the ins. is paid via your mortgage escrow make you personally contact and involve everyone regarding the change.
  • by Surprise on Feb 16, 2011 at 04:54 AM
    "Lets get to work" and send em packing out of Florida to fleece other folks in another state.
  • by shadow on Feb 16, 2011 at 04:24 AM
    I got tired of them raising their rates and switched about 3 years ago. I went to paying half of my premiums and then cancelled my car insurance with them as well. Saved a total of $1500 a year. Can't see how you can get a raise based on what might happen. They do this every time, but fail to give rebates if NOTHING happens.
  • by Anonymous on Feb 16, 2011 at 03:02 AM
    According to Weiss Research, State Farm Florida is one of the most financially weak Property Insurers in the United States. Sure, whine and cry all you want about a 28% increase in [average]statewide rates (not everyone's rates will go up 28%) but when it comes time to file your claim, you had better hope the $$$ is there. The bigger picture is the political one. We here in North Florida, pay outlandishly high premiums to subsidize the South Florida folks because of the strong South Florida legislative coalition. That's what you need to fuss about.
  • by catlover on Feb 15, 2011 at 06:06 PM
    I hope State Farm's request for this absurd increase is completely quashed! I have had them for my home and auto for almost 20, and never filed one claim, and just last May, 10' they already raised their rates 15%, across the board to everyone, all because they so nicely decided not to bale out of FL. They also nullified all the previous discounts for one having home auto, etc in one bundle with them. Their seemingly small 15% rate increase actually wound up raising my house payment a total of @ $70.00 a month(!) due to an escrow shortage. The fact is, it is not* easy for one to get good home and auto coverage together at a reasonable rate. I looked last year, and was surprised. all companies have certain conditions that vary greatly. I don't want a fly-by-night company, which are common place. If anyone knows of a respectable place in Tally, that is reasonable, and gives good coverage, I'm all ears.
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