Insurance rates for about 26,000 State Farm homeowners in three Mississippi coastal counties will rise 19.5 percent beginning in February.
Mississippi Insurance Commissioner Mike Chaney announced the rate increase, noting that in August he denied a request by the insurer to hike the rates more than 45 percent. At the time he said he wanted State Farm to answer additional questions about the need for the larger increase but also made it clear he was not going to approve such a big hike.
“The revised rate increase balances the need for affordable rates and sustainable premiums for policyholders in the face of rising costs to companies,” Chaney said in his announcement on the 19.5 percent decision for the coastal counties of Jackson, Hancock and Jefferson.
“I would have preferred that there be no rate increases at this time, but our role is to make sure the rates requested are not excessive and are justified and actuarially sound. I believe we have fulfilled that role,” he said.
He said that this increase, coupled with an increase affecting non-coastal areas earlier this year, yields a total average increase for the entire state of approximately 10 percent for State Farm.
State Farm said it is “disappointed” that it was unable to achieve the rates in the coastal areas it sought, according to David Majors, State Farm Public Affairs. He said the company will begin implementing the agreed rate around mid-February of 2010.
“This rate change will provide us the ability to more appropriately balance the risk with ensuring our ability to continue to serve our policyholders along the Gulf Coast and throughout Mississippi,” Majors said.
But Chaney is concerned that State Farm will drop wind coverage from the policies it does have in the state. That could force more insureds into the state wind pool, which already has more than 40,000 risks.
“Since State Farm did not get the full, requested rate increase,” Chaney said, “I have very grave concerns that State Farm may review wind coverage and non-renew or terminate existing wind coverage, which may force some consumers into the state-run wind pool.”
That concern seems well-founded. Majors said State Farm will continue to write wind on more than 20,000 policies along coastal Mississippi, but will be removing wind coverage from around 1,800 polices in the “most surge prone areas” of the coast. He said the approximately 1,800 policies is less than half the number it removed wind from about a year ago.
Chaney said that his department has no legal authority to stop an insurer from terminating wind coverage.
Chaney, as he has before, expressed disappointment that State Farm also continues to refuse to write any new business in the lower three counties.
He said that property owners should expect other insurers to raise rates also.
“This is not the end of it. It’s not just Mississippi, either. These rate increases are affecting all states with coastal areas,” he said.
Topics Pricing Trends Mississippi
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