Florida Office of Insurance Regulation Reviews First Community Dwelling Fire Rate Increase Request

The Florida Office of Insurance Regulation (“OIR”) held a public rate hearing yesterday, October 22, 2010, on a rate filing by First Community Insurance Company (“First Community”).

First Community, a subsidiary of Bankers Insurance Group, is requesting a statewide overall rate increase of 26.7 percent for its dwelling fire program, effective November 1, 2010.  According to First Community representatives, the increase is being sought due to higher reinsurance costs and lower premiums, which have been decreasing as a result of wind mitigation discounts and low rates in hurricane-prone areas.

OIR Deputy Director Michael Milnes, Actuary Bob Lee and Assistant General Counsel Rhoda Johnson facilitated the meeting on behalf of the OIR. 

Actuary Steve Alexander represented the Office of the Florida Insurance Consumer Advocate.

Mr. Milnes opened the hearing, stating that its purpose is to provide the opportunity for interested parties to discuss First Community’s rate filing.  He added that the proceedings are not intended to be adversarial, and that holding a public hearing provides transparency in the filing process.  

Wayne Matthews, First Community Chief Financial Officer responsible for the insurer’s property and casualty companies, provided an overview of First Community and a brief history of its previous filings with the OIR.  He related that First Community had withdrawn its most recent rate filing. 

First Community Consulting Actuary Nancy Watkins briefly outlined the elements of First Community’s filing, from which she determined that the rate indication is 29.9 percent and the requested rate increase is not excessive or inadequate.  Ms. Watkins added that the rating structure of First Community needs significant changes.  

Before reviewing First Community’s filing details, Mr. Lee encouraged insurers to meet with OIR officials prior to submitting a rate filing in order to address ambiguities or uncertainties that may lead to a delay in the filing approval. 

In regard to First Community’s filing, Mr. Lee expressed concerns with the calculation methodology utilized in its development.  He did not indicate whether he felt the requested rate increase was appropriate.     

Mr. Alexander also explained his filing review rationale and resulting determinations, which yielded a nearly eight percent difference in applied premium trends.  The loss trends were approximately the same.  In his review, Mr. Alexander used a smaller underwriting profit margin than that of First Community’s.  As a result, he determined a rate level indication of three-tenths of a percent–much less than First Community’s indication of 29.9 percent.

Following Mr. Alexander’s presentation, Mr. Milnes concluded the hearing, noting that the record will remain open until October 28, 2010 for interested parties to submit written comments.

Should you have any questions or comments, please contact Colodny Fass.