On the heels of Citizens’ rate increase request and after receiving several rate increases over the past few years, State Farm is once again looking to charge its customers more. This time, State Farm would like to increase the premiums its charges for property insurance by a statewide average of 14.2 % for homeowners policies, 48.8 % for renters, and 27.3 % for condominium unit owners. Of course, these are merely averages and those in more “risk prone” areas may experience much higher increases. State Farm has stated that the increases are, at least in part, related to the company’s decision to reinstate certain discounts for certain individuals who insure both their home and car with State Farm.
However, the Sun Sentinel reported that,
State Farm said in its proposal that it needs the increase because its ‘financial position has deteriorated significantly over the past several years.’ The company’s claims-paying reserves decreased to $368 million last year from $822 million at the end of 2007. It had an underwriting loss, when premiums don’t keep pace with claims and other costs, of 4 percent last year. The loss was 31 percent in 2010, 94 percent in 2009 and 32 percent in 2008.
Even though there have been no major disasters in Florida since Hurricane Wilma in October of 2005, State Farm still claims it is losing money — despite the fact that it has dumped tens of thousands of homeowners policies on Citizens in recent years and continues to refuse to write new homeowners policies at all in the state. Perhaps more interesting though, is that Ocala.com reported,
State Farm spokeswoman Michal Connolly…said the bulk of the increase request was due to sinkhole activity and fraudulent sinkhole claims.
While that sounds good in theory, State Farm, like all other insurance companies, denies claims that are deemed fraudulent, so it is always curious when they raise the argument that they lose money on ‘fraudulent claims.’ State Farm and other insurance companies successfully convinced the state legislature last year to remove the requirement that homeowner polices contain sinkhole coverage. If State Farm is worried about sinkhole claims, its concerns should have been alleviated with the enactment of the new law. However, State Farm, which already ate its cake, would now like to have it as well.
Of particular concern though is the fact that the Florida Office of Insurance Regulation (OIR) is not holding a public hearing on most of the requested increases. Instead, the OIR has only announced a public hearing on the increases related to the rental property insurance. The Florida Office of Insurance Regulation has promised though to give the public an avenue to send comments and concerns via a webpage that has yet to be seen.