Citing concern that insurance companies are using the 2004 hurricanes to unfairly raise rates, Florida’s Chief Financial Officer Tom Gallagher has called for an independent review of a rate increase on homeowners being sought by State Farm of Florida, the state’s largest insurer. The independent review, the third since June 1, will be carried out through Gallagher’s Consumer Advocate’s Office.
“This rate hike could potentially impact more than 900,000 Floridians and deserves close scrutiny,” Gallagher said. “Even more troubling is that State Farm’s request comes on the heels of a study showing the company earned record profits-billions of dollars-in 2004, despite four hurricanes.”
Gallagher called for independent reviews of three rate requests-Allstate Floridian Insurance Co., Cincinnati Indemnity Co./Insurance Co., and now State Farm. Following reviews of the first two companies, Gallagher called for the rejection of both rate requests citing deficiencies and saying the “numbers just don’t add up.”
Cincinnati’s request is the only one to date that has been denied by the Office of Insurance Regulation. Allstate’s request is pending. The Office of Insurance Regulation is headed up by Insurance Commissioner Kevin McCarty, who regulates insurance rates.
State Farm filed a request to raise homeowners insurance premiums by an average of 8.6 percent with the Office of Insurance Regulation. But Gallagher said that the percentage amount that State Farm has requested is deceiving because in many areas, the rate burden would be as high as 40 percent.
Nationwide to drop homeowners
In a related story, Florida’s fourth-largest homeowners insurer, Nationwide Insurance of Florida, announced that it will drop from 25,000 to 30,000 homeowners policies as part of a strategy to “reduce its overall exposure,” according to Florida Insurance Commissioner Kevin McCarty. More than 228,000 Florida homeowners have Nationwide policies.
Nationwide becomes the seventh insurance company to announce it is leaving Florida, or not writing new policies in the state after four hurricanes struck in 2004.
Last month, state regulators approved an average increase of 21 percent on Nationwide’s home policies and 25 percent for mobile homes.
“Even with rate increases, you have other pieces of the puzzle that are always changing (in the insurance market),” Joe Case, a spokesman for the Columbus, Ohio-based company told the Miami Herald. “That demands a continuing evaluation of our business strategy.”
The decision applies to policies covering single-family houses, condominiums, mobile homes and boats. The company will continue to sell auto policies in Florida.
The decision follows similar announcements by other insurers, including Safeco Insurance, which said last month that it would not write new polices and starting in 2006 would not renew existing ones.
Allstate Floridian hearings
The Florida Office of Insurance Regulation reserved a high school auditorium for five hours so that homeowners could voice their opinion on Allstate Floridian Insurance Company’s request to increase rates by 30 percent for 600,000 Florida customers-but only one policyholder showed up.
Four people attended the brief meeting, an Allstate Floridian spokesperson, an OIR representative, a state insurance consumer advocate and the homeowner. The homeowner complained that Allstate Floridian had not resolved a billing glitch, unrelated to the rate increase.
According to the Tallahassee Democrat, with no additional audience, the meeting adjourned for half an hour, started again, and again disassembled every hour thereafter until 6 p.m.
“I would have liked to have had a larger turnout,” Lee Roddenberry, with the OIR said, adding that these types of meetings can draw up to 1,000 people.
A miscommunication with the school caused an address error in the public notice for the event, but people at the wrong address were directed to the correct one, said Christopher Duer, an attorney with the insurance regulation office.
George Grawe, a lawyer for Allstate Floridian, said the low turnout might demonstrate that the public understands Allstate Floridian’s troubles. He said the rate increases were necessary to keep the company afloat in a state where the home-insurance business is “extremely unprofitable.”
“It is simply a matter of survival,” Grawe said.
The only opposition at Friday’s meeting came from Steve Burgess, Florida’s insurance consumer advocate, who said that Allstate hadn’t adequately explained its entire request in the filing and could be overestimating its liability.
“Allstate should be a responsible
corporate citizen and wait until the OIR
has a chance to make a decision,” Burgess said.
Also, the state’s chief financial officer said Allstate Floridian’s request for higher rates is unjustified.
Tom Gallagher said Florida-only companies are trying to justify higher rates based on losses in other states.
“They need to reconsider,” Gallagher said. “Their request for a rate increase is unjustified.”
Gallagher, who is seeking the Republican nomination for governor, said Allstate customers could apply pressure to
the insurer by participating in the public
hearings.
Topics Florida Carriers Legislation Homeowners A.J. Gallagher
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