More insurance rate hike requests predicted
Jul 18, 2008
Palm Beach Post--July 17, 2008
By RANDY DIAMOND
Palm Beach Post Staff Writer
It’s likely that State Farm won’t be the last property insurer to ask Florida for a new rate hike, an industry spokesman said Thursday.
”It won’t be surprising if additional companies make rate filings,” said Gary Landry, vice-president of the Florida Insurance Council, which represents most property insurers operating in the state. ”The vast majority of companies have continually told us that their rates are inadequate. Companies need to make sure they can get adequate rates to pay claims.”
Landry’s statement comes a day after Florida’s second-largest property insurer, State Farm Florida Insurance Co., announced it had filed with state regulators for a rate hike of almost 70 percent in Palm Beach County and almost 63 percent in parts of the Treasure Coast.
Statewide, the average increase would be 47.1 percent.
Earlier this month, Florida Farm Bureau filed for a 28 percent rate increase.
Officials disclosed the new rate hike application on the very day Insurance Commissioner Kevin McCarty formally rejected a 30.3 percent rate hike request that the company had filed last year.
The rate filings also followed months after rate reductions by the same insurers that had been mandated by a rate-reduction plan crafted by Gov. Charlie Crist and the legislature.
In total, the 136 property insurers operating in Florida had reduced rates by an average of 14.79 percent as part of the rate reduction plan.
But many companies quickly filed for rate increases after the decreases.
Ed Domansky, a spokesman for the state Office of Insurance Regulation, said state regulators will review all new rate-hike applications on their individual merits.
West Palm Beach attorney Robert Friedman, who is serving as adviser to a group of three law firms appointed by Crist to look into whether the insurance industry could be sued over rate hikes, said he was concerned about the rate filings.
Friedman said he expects rejections of the increases would be countered with policyholder cancellations.
”If they start dropping policies, you will have a lot of problems,” he said.
Dropped policies probably would end up in state-sponsored Citizens Property Insurance Corp., the insurer of last resort.
State Farm, in its rate filing Wednesday, said it would need to reduce its risk in Florida further if it could not get its rate hike approved.
The company, which has more than 1 million policyholders, is in the process of cutting 50,000 policyholders.
Friedman said the one thing that could change the rate debate in favor of insurers would be a hurricane that caused major property damage.
Then, the state might be forced to put credence to insurers’ views that their rates are inadequate to cover catastrophe losses, he said.
”We have had two relatively quiet hurricane seasons,” he said.
”The debate could change overnight if new storms come through.”