Florida Office of Insurance Regulation Considers State Farm Florida Insurance Rental Dwelling Rate Increase Request

 

The Florida Office of Insurance Regulation (“OIR”) conducted a public hearing today, October 9, 2013, on State Farm Florida Insurance Company’s (“State Farm”) rate increase filing for its rental dwelling line of business.  The overall statewide increase requested by State Farm was +35.1 percent, which would result in an average premium effect of +25 percent, it was explained.

To view the agenda, click here.

State Farm was also requesting approval of the elimination of all of its flat deductibles, the creation of minimum deductibles of 2 percent for hurricane claims and deductibles of 1 percent for all other perils.

OIR officials presiding at the hearing were Property and Casualty Product Review Deputy Director Michelle Brewer, Actuary Robert Lee and Assistant General Counsel Kenneth Tinkham.  In opening the hearing, Ms. Brewer noted that its purpose was to gather facts.  The proceedings were not intended to be adversarial, she explained, nor would they conclude in a determination on the filing. 

Following Ms. Brewer’s comments, State Farm representatives waived the time allotted for their opening remarks.  

Mr. Lee then asked the State Farm representatives a series of questions, to which the following information was determined:

• State Farm currently has approximately 29,000 policies in force for the commercial line of business in question.

• 3,159 policyholders would see a 50 percent or greater rate increase, while 1,037 would see a decrease due to the reduction of covered risk.

• While acknowledging that their company has enjoyed an underwriting profit over the last five years, State Farm representatives indicated that numerous contributing factors are not considered in that data, including the fact that no Florida-based catastrophes have occurred during that time period.  If an “average” number of catastrophes would have occurred, then State Farm would be showing a loss of 15 percent.

• State Farm’s reinsurance costs have decreased.

• State Farm’s surplus-to-premium ratio is less than 1:1.

Florida Insurance Consumer Advocate Robin Westcott also testified at the hearing, stating that she is speaking on behalf of State Farm’s 3,159 rental dwelling policyholders in questioning how State Farm was allocating its expenses and percentage of rate of return.  Ms. Westcott further noted that State Farm has struggled in Florida, but said she also recognizes the changes in the overall insurance market.

She noted that insurers’ current filings generally show a level of stability and improvement in the Florida market and that, with the resulting uptick in competitive pricing, policyholders impacted by the State Farm filing may wind up finding better rates in the private market.

Ms. Brewer did not indicate whether the OIR would approve or deny the State Farm filing.  Public comments will be allowed until October 16, 2013.

 

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