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State Farm Florida Insurance Co., a Florida-only property insurance company, filed an average 47.1 percent homeowners insurance rate increase with the Florida Office of Insurance Regulation on July 16.

Ed Domansky, spokesperson for the OIR said the state’s first step is to conduct a “careful and thorough review” of the filing to determine its compliance with generally accepted actuarial standards.

Since the filing exceeds 15 percent, Domansky said a public hearing will be held on Aug. 12 in Tallahassee.

Insurance Commissioner Kevin McCarty is on a European junket with the governor and a team of delegates. Speaking for McCarty, Domansky said the commissioner is committed to ensuring property insurance rates in the state of Florida remain affordable for all citizens.

State Farm Media Specialist Michal Connolly said State Farm Florida must be able to charge rates that cover expected costs of loss and operating expenses.

“While this rate increase poses a difficult situation for our customers and our company, it is the only responsible choice,” Connolly said in a written statement. “We must stabilize State Farm Florida’s financial condition in order to be able to pay our customers’ claims, particularly those due to catastrophic events such as hurricanes.”

Florida State Sen. Jeff Atwater, R-North Palm Beach, was quick to comment on the State Farm filing and also made an attempt at consoling Florida policyholders.

“I am deeply disappointed by the size and timing of State Farm’s new
rate hike request. I believe it is outrageously high, but I want every
homeowner in Florida to know that for the first time they are protected
from falling victim to this kind of profit-driven rate filing because of
the recent passage of the Homeowners’ Bill of Rights,” Atwater said.
“The rate filing will be processed completely in the sunshine and it
must conform with state-approved scientific and actuarial models, not
State Farm’s profit goals. No ratepayer should see an increase in their
insurance premiums before the filing has been thoroughly examined and passes the strict new tests imposed by the legislature this year,” he added.

Atwater said a key provision of the Homeowners’ Bill of Rights eliminates retroactive rate hike requests.

“Unlike the way insurance companies did business in the past,
they can’t simply impose a rate hike and ask permission for it later.
This is a key new protection for Florida insurance consumers,” the senator said.

State Farm Florida says it needs adequate capital to meet its obligations to customers who suffer losses.

Among State Farm Florida objectives listed in a backgrounder document, the insurer said it means to take necessary and timely steps to ensure the risk of insolvency and other marketplace disruptions are minimized.

State Farm said it also wants to ensure that automobile insurance policyholders across the nation, and property insurance policyholders outside the state of Florida, are not required to subsidize the costs of providing property insurance in Florida (and vice versa).

State Farm predicts that if immediate action is not taken, results will worsen to a net underwriting loss exceeding 100 percent by 2009.
The company projects that in 2009, for every $1 it receives in premium income, after reinsurance costs, it expects to pay out more than $2 in claims and expenses. These projections assume no hurricanes make landfall in the state.

In recent months, State Farm Florida suspended making interest payments on the $750 million in outstanding surplus notes due to State Farm Mutual, in order to preserve State Farm Florida’s capital, according to its report. State Farm Florida has also limited its writing of new property insurance business in the state.

Source: State Farm Florida

Topics Florida Homeowners Property