THE NEWS SERVICE OF FLORIDA: Under bill, State Farm could charge higher rates
Mar 27, 2009
By MICHAEL PELTIER
THE NEWS SERVICE OF FLORIDA
THE CAPITAL, TALLAHASSEE MARCH 27, 2009…Two months after being denied higher rates, State Farm Insurance Co. and other large insurers could charge premiums not regulated by the state under a proposal approved by a House committee on Friday.
By a unanimous vote, the House Insurance, Business and Financial Affairs Policy Committee moved along a proposal that would clip the regulatory wings of the Office of Insurance Regulation, which in January denied State Farm’s request for a 47 percent property insurance premium increase.
Sponsored by Rep. Bill Proctor, R-St. Augustine, HB 1171 would allow State Farm and other large insurers to charge higher rates to customers whose policies would be outside the realm of those required to pay assessments to Citizens Property Insurance Corp. in the event of a storm.
That pool now totals $36 billion in assets, which is used as collateral to sell bonds to pay for storm damage.
Officials from OIR said the measure, if approved, could lead to an exodus of more affluent policyholders from the pool that backs up state-run Citizens, Florida’s largest property insurer.
Such a shift, officials say, could make it more difficult for Citizens to raise money following a storm and more expensive for those policyholders who remain.
“The rates will likely be higher,” said OIR deputy commissioner Belinda Miller. “When you take policies out, it may impact their ability to bond.”
State Farm spokesman Mark Delegal countered that even if State Farm raised rates, they would still be cheaper than Citizens. He cited hundreds of such comparisons compiled by company agents around the state that seemed to corroborate the assertion.
“Even with an increase in rates, many policies would still be lower then Citizens,” Delegal said. “That’s the frustration.”
“This bill removes a significant amount of the mystery,” Rep. John Wood, R-Winter Haven, told members. “They have no idea what they are going to have to pay . This goes a long way to shining the light on the whole picture.”
Christine Turner, government affairs director for Citizens, said assessments would likely increase for policyholders who may not be able to afford staying with their private insurers. In many cases, those policyholders will be less affluent or live in older homes that will suffer more damage.
The vote is the latest chapter in an ongoing battle between State Farm and OIR, which in January rejected the company’s 47 percent rate hike request. The company responded by announcing it was shutting down its property insurance business in Florida.
Despite its unanimous vote Friday, the bill’s sponsor admitted the measure has a dim chance of success this session. But Proctor told members the mere discussion of the issue is of benefit as the state tries to shore up its hurricane coverage.
“I filed this bill to have just this kind of debate,” Proctor said.