Florida regulators have approved an average 6.9 percent rate hike for State Farm Florida Insurance Co., which is the insurer’s fifth increase in as many years.
The insurer had initially sought an average 14.9 percent increase citing hurricane and underwriting losses.
In addition to the 6.9 percent average increase in homeowner rates, rates for renters will increase by six percent while rates for condominium owners will drop by six percent. The new rates will apply to renewal policies, effective Feb. 1, 2013.
At a recent public hearing, executives said the Winter Haven, Fla.-based insurer had seen its surplus drop from $822 million in 2007 to $368 million in 2011. They also said that following the 2004 hurricane season it had to borrow $750 million from its parent company, State Farm Mutual, an amount it has yet to pay back.
Regulators, however, objected to State Farm Florida’s proposed 16 percent profit and contingency factor included in their rate proposal and the 10.8 percent commission it said it was paying agents despite not writing new business.
The approved 6.9 figure is fifth increase the insurer has received since 2009. That year, the insurer received a 27.9 percent increase, which was followed by a four percent increase in 2010. State Farm also received approvals for 6.6 percent and 18.8 percent hikes, which were implemented over a two-year period in 2011-2012.
State Farm Florida spokesperson Michael Bower said the insurer will not appeal the state’s Office of Insurance Regulation decision. “The decision on the filing speaks for itself,” said Bower. “We are now preparing to implement the rate changes as approved.”
In addition to the rate changes, regulators also approved a change in deductibles.
Previously, on the non-hurricane portion of their policy a homeowner could choose a deductible of one percent of the value of their property or $500 and on the hurricane portion of their policy, a two percent deductible. The new non-hurricane deductible options for homeowners have been changed to one percent or $1,000.
Bower said, however, there will be a few exceptions to the deductible changes. “For low value homes valued at $50,000 or less the deductibles won’t change,” said Bower.
State Farm Florida has not written any new policies in the state in several years, having dropped 125,000 policies in 2010 and another 10,000 in January. Brower said that the insurer is planning to offer more rental policies going forward.
State Farm Florida is the third largest homeowner insurer in the state and the second largest private company providing property insurance.
As of March 31, the latest data available, Citizens Property Insurance Corporation had 1.4 million policyholders, United Property and Casualty Insurance Company 567,000 policyholders and State Farm 467,000 policyholders.