State Farm, one of Florida’s largest insurers, will raise property insurance rates by an average of 52.7 percent this year under a plan approved Tuesday by state regulators.
The Bloomington, Ill.-based company said that the higher premiums will allow it to keep doing business in Florida despite predictions for more hurricanes.
State Farm said that spiraling costs for its own insurance against high claims is driving the increase, following two devastating hurricane seasons and forecasts for more of the same.
The state’s top insurance regulator said he knew it would be hard for customers, but noted the increase was much smaller than State Farm initially sought.
The company had filed plans in May for what would have effectively been an average increase of nearly 80 percent statewide, but the Office of Insurance Regulation balked at that proposal.
State Farm, which covers about one in five Florida homeowners, filed its amended plan Tuesday, and OIR officials said the numbers more closely matched what state actuaries had considered appropriate.
State Farm said that by increasing premiums, it will be able to continue to sell policies in Florida, unlike many companies that are dropping policies.
Existing State Farm customers will start paying the higher rate Nov. 1. The higher premiums will be charged to new customers starting Sept. 15.
Insurance Commissioner Kevin McCarty acknowledged that the lower increase would be little consolation to customers.
“While this approved rate is sharply less than what had originally been filed it is still substantial, and I am deeply concerned about the effect it will have on the household budgets of Floridians, particularly those with low incomes or on fixed incomes,” McCarty said in a statement released by his office (and appearing on our website yesterday).
“One of the foremost mandates of my job requires me to approve rate requests that are justified and that will provide the company the ability to pay the claims of Floridians whose homes are damaged or destroyed due to catastrophic storms, and I am confident the rate we are approving is justified under law,” McCarty said.
State Farm spokesman Chris Neal said the company doesn’t have much of a choice because of skyrocketing reinsurance costs. Reinsurance is coverage for insurance companies, bought to back up the company should it have massive claims.
Home insurers have been requesting large rate increases and in some cases not renewing policies in Florida following two years of heavy claims from hurricanes and fears of a more active period that have led to much higher costs of reinsurance.
Neal said that by raising rates, it will be able to continue to offer policies here.
“This is going to allow us to stay in the Florida market and that’s what our goal was,” Neal said.
The company says that even with no claims it still isn’t collecting enough in premiums from its customers to pay its own reinsurance costs.
State Farm will also drop the wind portion of its coverage for some particularly high-risk coastal homes and won’t renew the policies that cover damage to the commonly owned parts of some large condominium buildings.
Topics Florida Reinsurance Property
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