Florida regulators have approved $718 million in rate increases that will affect 4 million policyholders — even though there have been no hurricanes for five years.
The insurance industry says the increases are needed after nearly three years of insurers being denied increases. Florida insurers also claim they have been losing money.
Since 2005, carriers have dropped more than 2 million policies while the average statewide premium has increased 44 percent. In coastal regions, rates have doubled and tripled.
Last month, Commissioner Kevin McCarty told Florida officials that the market remains in a slump, with 58 percent of carriers reporting losses.
When seeking rate increases over the past year, insurers have cited sinkhole losses, mitigation discounts and increasing expenses for reinsurance, which is the coverage they buy from corporations that agree to pay their hurricane losses.
The largest increase to a for-profit carrier was $88 million approved for Universal Property & Casualty.
State Farm’s most recent rate hike is expected to generate $73 million in new revenue on top of a 29 percent rate increase last year. The current increase, an average 21 percent, applies only to customers with discounts for using storm shutters or other protective features on their homes.
The insurance industry and its advocates blame government attempts to control rates.
“When you charge artificially suppressed rates, it creates water behind the dam,” said former House insurance chairman Don Brown, a supporter of rate deregulation and consultant to Gov.-elect Rick Scott.
“It continues to pile up.”
However, according to the Sarasota Herald-Tribune, since 1998 Florida insurers have collected $20.5 billion more than they paid back in claims, $18 billion of that since 2005.
The newspaper said its review of financial filings found several companies have been telling state regulators they are losing money, while at the same time telling investors they are profitable Ð thanks to fees they get for management services performed by their affiliated companies.
Most domestic insurers now are set up to pay sister companies for management services, claims adjusting or other tasks. These companies often have the same owners as the insurer and operate with no employees of their own.
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