State Farm defends proposed homeowners’ insurance rate increase ; State Farm Florida defended its proposal to hike homeowners’ insurance rates an average of 28 percent during a public hearing Tuesday as necessary because the company’s finances have dwindled amid recent hurricane-free years.
“Our financial condition has deteriorated over the last two years,” State Farm pricing manager Adam Swope told the Office of Insurance Regulation panel. “Over the last almost three years, we’ve lost over $500 million of surplus. This company has lost a substantial amount of surplus in years with no hurricane events.”
The state’s largest private property insurer claims it needs increased premiums for its roughly 700,000 homeowners in Florida to pay for rising noncatastrophic claims, such as sinkholes.
The company has also proposed raising premiums for commercial multiperil policies an average of 96 percent. That plan generated little discussion Tuesday, as it affects an estimated 5 percent of State Farm’s clients.
Steve Alexander, actuary for the Office of the Insurance Consumer Advocate, did not suggest rejecting the rate increase, but had a few tweaks. He recommended bringing State Farm Florida’s premium costs closer to the national average and doubling the average sinkhole discount policy.
Belinda Miller, general counsel for the Office of Insurance Regulation, said some people would be surprised to see their premiums increase by 40 to 50 percent if the rate passes. She asked Swope if State Farm considered capping rates to “prevent the shock in the marketplace.” The carrier did, he said, but decided against it.
Dissatisfied customers, Miller said, would probably call their agent and ask about other options. Would these customers go to Citizens Property Insurance, the state-run insurer of last resort, or would State Farm ensure these customers could go to other companies? Swope wasn’t sure.