Citing sinkhole losses and higher operating expenses, State Farm Florida asked state regulators this week for a 28 percent premium increase on its homeowners policies.
Sinkhole claims, which are approaching $2 billion over the past five years in Florida, have exploded at a great cost to the insurance industry.
Questioned by state actuary Bob Lee, State Farm executives testified that it lost $327 million in the last five years, most of it in the last two, on sinkhole claims alone. The company is dropping its sinkhole coverage in standard policies, but offering it to homeowners separately at a premium rate.
However, the state’s insurance consumer advocate was at odds with State Farm over the amount of discount policyholders should receive when the sinkhole coverage is removed from their policy.
State Farm wanted to discount the policies about $150 on average, but actuary Steve Alexander testified at the two-hour fact-finding hearing that it should be at least twice that.
Alexander also said State Farm was paying its agents commissions well above the national average, adding unnecessarily to its operating costs in Florida.
If approved, the new rates would take effect as early as April 1 for new business and July 1 on renewals.
State Farm also asked for a rate increase of nearly 96 percent for a smaller book of its business for rental dwellings. It holds about 50,000 such policies now.
Deputy Commissioner Robin Westcott said the Office of Insurance Regulation would likely have a decision on the State Farm requests in two to three weeks.
State Farm reached an agreement with OIR a year ago to cut 125,000 policies over an 18-month period to reduce its liability in hurricane-prone Florida.
State Farm is the largest private property insurer in Florida with slightly more than 500,000 policyholders. The state-backed Citizens Property Insurance Corp. is the largest with 1.2 million policyholders.
State Farm and OIR had been at odds on rates, but Florida’s Legislature wants more accommodations for private insurers in hopes of somehow reducing its increasing risk with a growing Citizens, which is backed up by assessments on most insurance policies sold in the state.
Dozens of startup companies have evolved in Florida in the past decade in attempts to reduce Citizens’ stake.
Topics Florida Claims Pricing Trends
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