Hurricane insurance hearings create own storm for State Farm

TALLAHASSEE — When State Farm officials appeared before Florida regulators Tuesday to seek a 47.1 percent statewide average rate hike, Office of Insurance Regulation general counsel Steve Parton zeroed in on why State Farm averaged the results of three hurricane models.

A key component of a company's rate need, the computer models estimate the dollar amount of losses from a storm.

Parton argued the models cannot be tinkered with, and State Farm was "taking three wrong answers and averaging them together to get a right answer."

"I don't intend to be confrontational," answered Jeff McCarty, a State Farm vice president. "But each model is approved."

In a sometimes tense three-hour hearing, Florida's largest private home insurer said it needs the 47 percent rate hike to remain in business. State Farm's revenue has dropped 33 percent year to date, officials said, because of low premiums and a doubling of discounts it must give policyholders who harden their homes.

"The profit picture for State Farm Florida is nonexistent," said company president Jim Thompson.

But regulators questioned how State Farm could show huge losses even though it bought reinsurance from its parent company, is dropping 50,000 coastal policyholders, and stopped writing new policies in Florida.

"Enough is enough," said Gov. Charlie Crist. "I think he (Insurance Commissioner Kevin McCarty) will handle this case appropriately, and I think you know what I mean by that — rejecting it, the increase."

Parton said the hearing "certainly verified some our of suspicions" about how the company derives its numbers.

If regulators don't approve the hike, State Farm can refile or appeal to an administrative law judge. Or drop more policies.

But Thompson said the company has no plans to do that. "The plan is to get the 47.1 percent increase," he said, "and then consider our options."

Comments on this article

by Charles	Aug 18, 2008 11:47 AM
I don't know of any other for profit company that handles losses by cutting off revenure stream, i.e. canceling polices and not writing new ones. A lot of these policies never had a claim. then they complain they have not money. Duh!

by Miriam	Aug 17, 2008 7:59 PM
I strongly think WE should drop them and go with someone else NOW. Then we'll see what their next strategy will be.

by Linda	Aug 16, 2008 3:09 PM
SF dropped +50K higher risk homeowners to save their "risk pool", now rate hike? What happened to profits from my +28 yrs home premiums, then kicked me out-only small Charley & prior water leak claims??!! Suggest they get a better investor advice!!

by Don	Aug 15, 2008 1:00 PM
It is reasuring to see our state Insurance Commissioner take on the outrageous rate hike demands of State Farm. Perhaps State Farm will just have to go out of business and allow better run companies to serve Florida's residents.

by State Harm	Aug 15, 2008 10:16 AM
See if this happens: Rate hike is denied, then SF drops 200,000 polices. It's all arranged. The fix is in.

by Jack	Aug 14, 2008 10:55 AM
Jim - I'm definitely not pro-Crist. However, you certainly can't blame him for a nationwide "recession" resulting from real estate insanity that occurred the 3 years preceding Crist's election. Simply, we used to build things in this country..no more

by Dave	Aug 14, 2008 10:55 AM
Jim your right, not all business are evil but Crist knows the truth about State Farm and I also know, were just trying to let you know.If you have to put in a claim you will learn but the hard way.

by Dave	Aug 14, 2008 8:36 AM
Tom If you talk to Mr. Thompson,ask him why State Farm would Lie and slander a jury member when they lose a case,I hope they lose this to. They need to learn their immorality needs to be stopped

by Jim	Aug 13, 2008 8:18 PM
I do not like rate hikes either . However , Crist came into office with an adversarial approach towards business . What has the result been ? A collapsed economy and businesses' refusal to help turn things around . All in business are not evil !

by Tom D	Aug 13, 2008 7:35 PM
Run State Farm out of town with tar and feathers.

by DBB	Aug 13, 2008 5:53 PM
Florida needs to team up with other states getting screwed by the insurance companies and kick them all out. When their stock tanks cause of that, maybe they will revise thier idea of "pup" companies...

by Lynn	Aug 13, 2008 5:46 PM
Why should premiums from another state be used to pay claims in FL? It doesn't work that way in the real world. This naivety is resulting in our insurance crisis. We're pinning these carriers up against the wall & all they can do is leave the state.

by JT	Aug 13, 2008 2:09 PM
State should tie the number of auto policies, annuitities and life insurance policies SF can issue to the number of NEW HO policies they write. Years of hooking us on Home&Auto in one place and being so huge kept other companies from entering market

by Disgusted	Aug 13, 2008 2:09 PM
Insurance is the biggest scam ever perpetuated upon Americans and enabled by the government. If the politicians didn't own so much stock in the very profitable insurance companies, maybe some real oversight and regulation would occur.

by Tank	Aug 13, 2008 12:05 PM
Please do a piece on Citizens Insurance , is it any better than State Farm ?

by Pat	Aug 13, 2008 11:20 AM
Why don't you ask the Dept. of Ins. why it forced State Farm to drop everyone within a mile (+50k) instead of allowing them to drop single line customers only (>30k)

by Dil	Aug 13, 2008 11:20 AM
Still waiting for my refund from Citizens ! Still waiting for my decrease in preminum to 'drop like a rock" , the State has complete control of Citizens Insurance .Why so much for government backed insurance ?

by Elizabeth	Aug 13, 2008 11:19 AM
Who said State Farm is not greedy??! What planet are you from? Let's have the State Farm crews relocate to Iraq or jungles of Columbia screwing those people over, then see how many survive in a couple of years. Hey, is that a new gambling idea?

by Pete	Aug 13, 2008 9:50 AM
Time for this good neighbor to move SF needs to find a new place to play. get out of Florida SF and cry some where else. Everyone should do I like do toss their flyer in the trash and kick them out of florida

by Tom	Aug 13, 2008 9:50 AM
Gee R. I really feel sorry for State Farm. They can get out as far as I am concerned. Just like any "bad" neighbor. Millions in profits at their parent company. If they were not making money here, do you think they would still be here?

by Sawyer	Aug 13, 2008 9:50 AM
{R} You sound like a S.F. agent that's trying to stay employed. Also, we can't see the real numbers like agents can. One more thing, I find that you using the GREEDY word interesting ! Lets face it, S.F. bit off more than they can chew.Carma victim ?

by R	Aug 12, 2008 8:44 PM
You people are a joke. SF simply wants to be able to pay their claims unlike many other insolvent companies in this state. If you actually looked at the numbers, you would see they are not being "greedy."

by Craig	Aug 12, 2008 3:56 PM
This is old news. I watched the hearing today and there were no new non-renewals announced. They just clarified what was already in the pipeline. If you're getting dropped, you already know about it.

by tom	Aug 12, 2008 3:55 PM
Just more 'unregulated' repbulican big business doin their thing!! SF has made piles of money in FLA except for 04 and 05...why the hell do they call themselves an insurance company anyway? Clearly they really want to just be a n investment firm!

by jas	Aug 12, 2008 3:39 PM
like a GOOD NEIGBHOR...What a joke...

by bill	Aug 12, 2008 3:38 PM
By the way, SF said they would reduce my H/O premium by 10% if I installed hurricane panels on my home. After spending $8000 to do so, they informed me the 10% was an error, they reduced it only 5%. Can't trust SF!

by Sawyer	Aug 12, 2008 3:38 PM
I,am with Fred.Sit back and watch them set themselves on fire. Like a good arsonist State Farm is there. I dropped those sharks years ago. Guidelines won't let me say what I really think. So just sit back and wait. with the marshmallows.

by bill	Aug 12, 2008 3:02 PM
State Farm is NOT a "Good Neighbor". I had been a State Farm policy holder for 38 years when I was notified I would not be renewed. Good riddance to State Farm!

by Jeanie	Aug 12, 2008 2:41 PM
It's like State Farm is holding the State and Homeowners for ransom. Either let them increase the rates by 47% or they will drop more policies. Oh and by the way they do it anyway. Someone needs to step in with some insurance regulations.

by Greg	Aug 12, 2008 2:09 PM
Tom is right...I dropped State Farm as my auto insurer last year after they announced more cuts. The state of Florida should do the same...ban them from writing any kinds of policies if they aren't willing to assume all risks at a decent rate.

by john	Aug 12, 2008 1:57 PM
They talk about losses from a couple seasons. I've never filed a claim, been paying them for 20 years, and what about all the profits they made in the years prior to the couple of bad years. I'm pretty sure we'll be dropped because of our location.

by Tom	Aug 12, 2008 1:57 PM
"everyone" should drop the coverage they have with State farm to make a point, if they will not insure my house they sure as heck are not going to insure my cars, boats, etc... What happened to all the money they pocketed before the hurricanes hit?

by TOM	Aug 12, 2008 1:52 PM
I have been a SF cust for 40 years, No Claims, in the family 8 cars and 2 homes. I was .97 of a mile from Tampa Bay.03 to close, needed to be 1 mile or more, SF also let my 2 agents go, in the ins business 50 years... kick SF out totally......

by Troy	Aug 12, 2008 1:27 PM
I like the timing. Half-way through hurricane season with the worst part coming up.

by M	Aug 12, 2008 1:15 PM
Pathetic. SF really needs to look at their leadership and figure out how they got in this hole, without blaming anyone but themselves. Now the citizens, their policyholders suffer. They cannot blame the 04-05 storm season for their problems.