State Farm Homeowners Rate Increase Denied in Louisiana

Louisiana Insurance Commissioner Jim Donelon declined to approve a rate request filed by State Farm Fire and Casualty Company that would have raised homeowners insurance rates by a statewide average of 19.1 percent. State Farm filed the rate revision in December 2009.

The Louisiana Department of Insurance reported that the rate increase would have provided the company with an estimated $67,625,043.00 in additional premiums. It also would have varied in different areas of the state, ranging from a 0.5 percent decrease to a 44.1 percent increase, the department said.

The Associated Press previously reported that State Farm indicated the rates would have changed by the following amounts in Louisiana’s metropolitan areas: New Orleans, 30.4 percent increase; Baton Rouge, 6.6 percent increase; Monroe, 3 percent increase; Alexandria, 18.2 percent increase; Lake Charles, 35.2 percent increase; Lafayette, 35.2 percent increase; Houma-Thibodaux, 30.4 percent; and Shreveport, 5 percent decrease.

After reviewing the relevant data, however, regulators determined the requested increases to be unreasonable, the LDI said. The department found that in its filing State Farm relied on an excessive loss trend, as well as an unreasonable hurricane risk provision.

Regulators were concerned about the significant weight given the latest version of the EQECAT hurricane model used by State Farm in justifying their revision. The LDI noted that the EQECAT model’s projected hurricane loss provisions are 150 percent higher than projected hurricane loss provisions produced by the two other industry hurricane models utilized by State Farm in the filing, without adequate supporting evidence for the difference.

“When a rate revision is filed, we use all evidence available to make the determination as to whether the revision is reasonable and justified, Donelon said in a statement released by the department. “In this case, State Farm Fire and Casualty falls short of proving the need for an increase of this magnitude.”

In 2008, State Farm had a market share of 27 percent of all Louisiana homeowners policies and is the largest homeowners policy provider in the state. It has about 296,000 policyholders in Louisiana.

The company received an average 8.3 percent increase last year in Louisiana after asking for 13.7 percent.

Topics Trends Louisiana Pricing Trends Hurricane Homeowners State Farm