State Farm Insurance requests 6th rate hike in 2.5 years
Jun 27, 2012
The following article was posted to the WPTV.com website on June 27, 2012:
State Farm Requests the Sixth Rate Hike in 2.5 Years
By Julie Patel
State Farm, Florida’s third largest home insurer, is requesting a 15 percent statewide average rate hike due to changes it wants to make on home insurance discounts and deductibles.
The changes include increasing or reinstating some discounts but overall, they are projected to increase rates by a statewide average of 14 percent for homeowners policies, 49 percent for renters and 27 percent for condominium unit owners.
The proposed increase comes after State Farm received rate increases the past 2.5 years of 28 percent, 14 percent, 7 percent, 19 percent and 2 percent, according to the insurer’s proposal to regulators.
The Office of Insurance Regulation allowed State Farm Florida to shed 125,000 policies in recent years, which led the insurer to lose its spot as the largest private insurer of homes in Florida. It is the second largest, with 466,797 home insurance policies, including 66,960 in Broward, Palm Beach and Miami-Dade counties. Universal Property & Casualty Insurance in Fort Lauderdale is the largest after state-backed Citizens Property Insurance.
A popular discount that would be reinstated under State Farm’s rate proposal is the home and automobile discount, which gives eligible policyholders a 10 percent discount on the non-hurricane portion of their homeowners insurance premiums if they also have an auto policy with the insurer.
“That’s a positive option for customers,” said State Farm Spokeswoman Michal Connolly. “All of these changes are to better reflect what’s appropriate for that discount or option.”
The actual rate increase will depend on what discounts homeowners qualify for and what deductibles they choose. For instance, the 14 percent increase for homeowners premiums would work out to be a 3 percent increase if all affected policyholders chose higher deductibles, according to State Farm’s proposal.
Increases for individual policyholders can vary greatly from the statewide average. After regulators approved a 19 percent statewide rate hike for State Farm last year, some South Floridians reported triple-digit increases.
State Farm said in its proposal that it needs the increase because its “financial position has deteriorated significantly over the past several years.”
It reports its claims-paying reserves decreased to $368 million last year from $822 million at the end of 2007. It had an underwriting loss, when premiums don’t keep pace with claims and other costs, of 4 percent last year. The loss was 31 percent in 2010, 94 percent in 2009 and 32 percent in 2008.
The Office of Insurance Regulation will hold a rate hearing on State Farm’s request on July 25.