The Tampa Tribune ran an editorial in today’s paper regarding the forty-seven percent average rate increase request made by State Farm. Many editorials are not very helpful. This one is on point and I hope that our government leaders are paying attention. Here is the editorial in its entirety:



Big Insurer’s Bid To Up Rates Scary Blow After Two Calm Years The Tampa Tribune Published: July 25, 2008 On its face, State Farm’s request to increase rates for hurricane coverage by an average of 47 percent statewide is outrageous and unjustified. If so, it should be rejected. But if the company has based its application on a state-approved formula and solid numbers that don’t export profits to its parent company, the implications are ominous after two storm-free years. If State Farm Florida really needs sharply higher rates to stay in business here, that means the state-sponsored Citizens Property may be even more underfunded than has been acknowledged. It could also be a warning that many of the smaller new insurers offering lower rates are gambling on good weather and might not survive a major storm. In Hillsborough, State Farm customers already pay rates about 20 percent higher than those insured by Citizens, according to the state’s comparisons at Yet State Farm in recent years reports having $1.20 in costs for every dollar it collected in premiums. The storms of 2004 washed away the company’s surplus. Those numbers should be troubling to every policyholder. They suggest today’s average rates of $2,000 statewide still aren’t high enough. If rates really do need to increase about 50 percent to cover the actual risks, that means typical homeowners can expect to pay an extra $70 to $100 each month for property insurance. That’s scary. Many lawmakers were quick to call State Farm’s request unjustified. All Floridians should hope that a hearing Aug. 12 confirms that general suspicion. Congressman Robert Wexler is calling for a congressional investigation. The Democrat from Boca Raton says State Farm’s rate increase is "not consistent with the realities of the conditions in Florida." We concur. But if State Farm’s numbers do hold up, they will blow a hole in the Legislature’s insurance reforms. Other insurers will be quick to ask for more. And even with higher rates, all ratepayers will remain at risk of paying even more if the statewide cost of storm repairs exceeds the cash available in the Florida Hurricane Catastrophe Fund. We know the state is paying $224 million for the right to borrow up to $4 billion from Berkshire Hathaway in case a major storm hits this year. But that’s not half of it. The Legislature, in an attempt to keep rates low, has exposed the state to up to $28 billion in liability. Numbers that big should make all taxpayers nervous. What would make Florida breathe easier would be the return of a healthy private insurance market. An indicator that things are returning to normal will be an attempt by the big insurers to expand their market share. Just the opposite is happening. Winning a 47 percent rate increase is a sure way to lose customers. One bright spot among the many clouds is that the new, smaller companies have learned from others’ mistakes. They are spreading their risks and not concentrating in a few counties, especially coastal ones. Every property owner and renter should hope the small companies are right and State Farm is wrong. If not, there are stormy financial times ahead, hurricanes or not.