Smack in the middle of Florida's efforts to rein in the cost of property insurance, State Farm asked the state Wednesday to raise its homeowner rates an average of 47.1 percent statewide and as much as 91 percent in parts of Pinellas County. If approved, the new rates would take effect starting March 1, 2009.
The request comes after two quiet hurricane seasons. After State Farm already announced it was dropping 50,000 coastal policyholders. After the company decided to stop writing new homeowners policies in Florida. And after it got a new law this spring that gives it a competitive edge in the auto market, offering new discounts to its auto customers for being policyholders of Citizens Property Insurance, the state-run property insurer.
Bloomington, Ill.-based State Farm has a significant presence in the Tampa Bay area with about 100,000 policyholders, or nearly one out of every six homeowners. Because rates vary greatly depending in large part on location, the proposed rate hike would hit Pinellas the hardest in the Tampa Bay area with increases from 55 to 91 percent. It could also mean increases of as little as 10 percent in parts of Pasco County, yet up to 79.4 percent in Manatee County.
State Farm Florida is the state's largest private insurer with about 950,000 homeowner policies. The battle to get the rate approved has already begun, with state regulators scheduling a public hearing Aug. 12 in Tallahassee.
State Farm's move stunned some Florida lawmakers who passed insurance reforms that have lowered rates this year an average of about 12 percent. State Farm was part of that downward trend. After winning a 52 percent rate increase in 2006, State Farm agreed last year to cut its rates by 9 percent.
"At least no citizens will have to fall victim to this kind of an outrageous rate hike until the state has the opportunity to assess it,'' said expected incoming Senate President Jeff Atwater, R-North Palm Beach. "Other companies are working with the (legislative) changes. For State Farm to come back to the well again after two quiet years and lay this on the table … you can't be telling me that the premiums they've been collecting are 50 percent of where they need to be."
But that, in essence, is State Farm's argument.
The company must be able to charge rates that cover expected losses and operating expenses, said State Farm spokesman Chris Neal. He said that since 2000, State Farm's property lines paid out $1.20 in claims and expenses for every $1 of premium collected. State Farm suffered net underwriting losses of $4.2-billion from the eight storms that struck Florida in 2004 and 2005, he said.
"We've tried to do everything we can to stay in the market, and our focus hasn't changed," Neal said. "We're making this filing so we can continue to do business in Florida."
Not everyone sees it that way.
"I wish you'd ask me to sit down first," said a surprised Sen. Bill Posey, R-Rockledge, when told of the news. Posey oversaw insurance law changes in the state Senate and is running for Congress. "You have to wonder if it is an effort to drop more policyholders. … At first blush this suggestion (of a hike) doesn't pass the straight-face test."
Office of Insurance Regulation spokesman Ed Domansky said his agency has begun reviewing the filing "to ensure that the requested rates are neither excessive, inadequate or unfairly discriminatory. (Insurance) Commissioner (Kevin) McCarty remains committed that property insurance in Florida remains available and affordable."
Rep. Dennis Ross, R-Lakeland, said he thinks the culprit is lack of competition caused by capping the state-run insurer's rates.
"It doesn't surprise me," said Ross, an outgoing lawmaker who helped negotiate recent changes to insurance laws on behalf of the more conservative Florida House. "This will be used as a political football, as opposed to being used as a symptom of what the problem is: We don't have competition. Competition would drive down and stabilize rates."
Tom Zucco can be reached at firstname.lastname@example.org or (727) 893-8247.