Here's the headline: Regulators have approved an average rate hike of 18.8 percent for Florida homeowners covered by State Farm, a hefty hit but significantly less than what the state's biggest private property insurer had wanted.
And here's the reality: That average rate increase is woefully misleading if you happen to be a State Farm customer.
Most of its Tampa Bay homeowners will see a far smaller increase in premiums. For about a fourth of them, roughly 16,000 policyholders, rates will actually fall. In Pinellas County, the majority will enjoy an average 10 percent rate cut.
The news is more grim if you live in Hernando County. In a territory that includes most Hernando residents covered by State Farm, rates will nearly double — on average. A relatively small slice of Pinellas County faces an average 60 percent rate hike.
"There's no individual policyholder cap, so you'll see a varying degree of change on your insurance bills," State Farm spokesman Michael Grimes acknowledged when the new rates were disclosed Friday. The risk of a location, housing attributes and qualified discounts will all affect the bottom line, he said.
Hernando is one of the focal points of rising sinkhole claims, but Grimes said he could not directly say that was the reason for the surge in rates there.
The potential that some State Farm homeowners could face sharply higher premiums was raised during a rate hearing in February.
Belinda Miller, general counsel for the Office of Insurance Regulation, questioned whether some customers would be surprised to see their premiums increase 40 to 50 percent if the rate passed. She asked State Farm pricing manager Adam Swope if the insurer considered capping rates to "prevent the shock in the marketplace." The carrier did consider that, he said, but decided against it.
The higher rates, which are less than the 28 percent average boost State Farm sought, will take effect June 1 for new business and beginning July 15 for renewals.
Florida Insurance Commissioner Kevin McCarty said in a statement that the approved increase reflects "both a rate need by the company as well as cost-drivers in the system." In a separate filing, McCarty approved a 62 percent increase for State Farm's commercial residential policies, which cover homes that are owned by a person or business entity and rented to others.
Florida has been spared a major hurricane for more than five years. But State Farm maintains that it needs to boost premiums for its 633,000 policyholders because of rising costs unrelated to hurricanes.
"Our financial condition has deteriorated over the last two years," Swope, the insurer's pricing manager, told regulators during the February hearing. "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."
One of the biggest complaints from State Farm and other property insurers is that sinkhole damage claims are driving up costs. They allege many of the claims are bogus. Attorneys representing homeowners say insurers are just trying to avoid living up to their obligations.
McCarty has approved double-digit rate increases for a string of property insurers over the past two years in part based on rising sinkhole payouts. The Senate is considering a bill that would free insurance companies from a requirement to offer comprehensive sinkhole insurance.
Last year, State Farm filed with regulators to let it cancel all its homeowners policies with sinkhole coverage and offer those customers a new hazards policy that includes catastrophic ground collapse but would force customers to buy additional sinkhole protection. Grimes said that action is on hold as his company waits for the Legislature to act.
The rate approval comes as lawmakers consider a plan to let state-run Citizens Property Insurance Corp. increase premiums by up to 25 percent a year. Under current state law Citizens cannot raise rates more than 10 percent annually.
Advocates say they want Citizens to return to its roots as an insurer of last resort, pushing people to get coverage on the open market. With support of the Republican-led Legislature and Gov. Rick Scott, the measure is likely to become law.
Citizens, with a policy count of 1.3 million, is the only property insurer that trumps State Farm Florida.
Three years ago, State Farm threatened to pull out of Florida's property insurance market. Under a deal struck with regulators in late 2009, it was allowed to drop some 125,000 homeowners across Florida to limit its exposure and raise rates an average 15 percent for those it kept. As of December, it had just under 80,000 property insurance policies left in the bay area.
Regulators and consumer advocates were concerned that the purge plus this new round of higher State Farm rates would push more people into Citizens and increase its hurricane exposure even more. If Citizens is unable to pay claims after a major hurricane, all Floridians with an insurance policy could be assessed to help make up the difference.
Jeff Harrington can be reached at (727) 893-8242 or firstname.lastname@example.org.