Florida’s CFO Tom Gallagher has requested a freeze on all insurance rate increases for homeowners policies.
According to a press release issued by the Department of Financial Services: “I learned today that Nationwide has submitted a rate request in excess of 100 percent for mobile homes,” Gallagher said. “I’m extremely concerned that there is a trend with companies, including Nationwide, trying to recoup their losses from the hurricanes or raising their rates so policyholders are forced to drop coverage.”
Joe Case, a Nationwide spokesman responded: “Nationwide has not filed its request to recoup past losses, we are lawfully seeking the rate change based on computer models that assess our future loss potential,” Case said. “Even if Nationwide’s homeowner rate change request is approved we will still be in line with market prices in Florida.”
Case said that in Florida mobile home insurance rate increases will only effect a small number of owners because a small percent of Nationwide’s policies are for mobile homes. “We want to be able to properly serve these customers in the future,” he commented.
Nationwide is still assessing the impact of the proposal to freeze rates at this point.
Gallagher said homeowners who have suffered losses from the four back-to-back storms should not be victimized a second time.
“Insurance companies should not be in a rush to raise rates,” he said. “The prudent thing to do is to slow down and consider the consequences of rate increases on storm victims who are not able to handle an additional financial burden.
“That’s why I’m asking state regulators to hold off approval of pending and future rate increases.
“The market needs to stabilize and state lawmakers should have the opportunity to act on recommendations for insurance reform that will help offset the need for rate increases.”
FIC Comments
“Members of Florida’s Insurance Council share in Tom Gallagher’s concerns over rising insurance rates following Florida’s unprecedented 2004 hurricane season. Insurance carriers in Florida have already paid out a record $13 plus billion in claims, and with that payout expected to exceed $21 billion after all claims have been settled.
Florida law prohibits insurance carriers from raising rates to recoup past losses. Furthermore, state statutes maintain that any and all rate increases must be based on tomorrow’s costs, not yesterday’s losses. The Office of Insurance Regulation rigorously enforces those state statutes.
Florida’s insurance carriers are equally committed to adhering to these state statues. However, Florida’s insurance carriers must balance concerns over insurance rates with their fiduciary responsibility to remain actuarially sound so that Florida consumers are protected from the upcoming 2005 hurricane season.
Of the more than 250 insurance carriers operating in Florida, only 31 carriers have filed for rate increases—and most of those approved increases are 10 percent or less with only two or three approved in the 20-25 percent range.
It must be pointed out that these approved rate increases stem in part from reinsurance costs experienced by companies as they renegotiate their reinsurance treaties for 2005. They also reflect revised higher estimates of losses from future hurricanes, including higher costs for building supplies and labor.”
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