Although lawmakers didn't claim to be providing a permanent fixfor Florida's property insurance market when they passed reformlegislation in 2007, they did at least hold out hope that consumerswould find some relief from homeowners' insurance soaring premiumsand wide rate fluctuations.

That hope appears to have been in vain. Recent double-digit ratehike requests from big-name players are stinging examples of thecontinuing yo-yo condition of Florida's market.

In June, Florida Farm Bureau requested a 28.4 percent rate hikefor its 80,000 customers. The rate hike application was disclosedon the very day McCarty formally rejected a 30.3 percent rate hikerequest that the company had filed last year. OIR's action to thenewest filing was swift. Only days after a July 30 hearing on therequest, McCarty issued a formal Notice of Intent to Disapprove thefiling. Among his objections, McCarty noted the carrier's failureto provide all requested information.

On the heels of the Florida Farm Bureau request came a StateFarm filing for an average 47.1 percent statewide rate increase.State Farm Florida, with almost one million policyholders, is thestate's largest private homeowners' insurer, although it currentlyis not writing new home insurance business here. A letter from itsattorneys to Chief Financial Officer Alex Sink supporting its newrate request contended that, “Absent immediate action, State FarmFlorida is projecting a net underwriting loss exceeding 100 percentin 2009.” To ensure that former banker Sink could do the math, a“backgrounder” accompanying the letter stated, “In other words, in2009, for every $1 the company receives in premium income, afterreinsurance costs, we expect to pay out more than $2 in claims andexpenses. The projections assume no hurricanes make landfall in thestate…”

State Farm's request, in light of its comparatively small ninepercent rate cut last year, brought immediate criticism fromlawmakers. Rep. Bill Galvano (R-Bradenton) called it“inexplicable.” While the hike won't impact fellow representativeKeith Fitzgerald (D-Sarasota) -the company is not renewing hispersonal homeowners' coverage-he nonetheless expressed surprise atthe hike, saying it shows the insurance problem has not beensolved.

State Farm traditionally goes “all in” on rate hike requests. In2006, it sought a 52 percent rate increase, and ended up with halfthat.

Public hearings are mandatory for rate increase requests over 15percent, and the hearing for State Farm Florida was held August 12in Tallahassee. Although OIR was still officially considering therequest at press time, company officials did not get a warmreception at the three-hour hearing. Skeptical regulators grilledthem about the claims that they were losing money, their disbeliefand displeasure evident.

Into the Fray

McCarty's OIR has not been shy about calling insurers intoaccount.

Last year, an Allstate request for rate boosts up to 41.9percent was put on hold after the company refused an OIR requestfor documents, arguing that to do so would disclose trade secrets.McCarty filed suit, and the acrimonious and well publicized courtbattle ended with a ruling in OIR's favor. A September 15proceeding before the Florida Division of Administrative Hearing toexamine whether Allstate falsely certified its September 2007 ratefiling and falsely asserted trade secrets was cancelled August 15when the parties entered into what was termed a limitedagreement.

In addition to paying a $5 million fine to the InsuranceRegulatory Trust Fund, OIR said that the agreement requiredAllstate to “lower its homeowners insurance rates in allterritories of the state by 5.6 percent within 30 days of theagreement, for a total reduction of 19.8 percent when including the14.2 percent reduction that took effect June 1, 2007. Allstate alsomust write 100,000 new homeowners insurance policies over the nextthree years; and Allstate's corporate office must cancel a $175million surplus note it issued to the Florida Allstatecompanies.”

OIR Remains Upbeat

Despite the court battles and carrier pull-backs, the moodremains determinedly positive at OIR. “The Office of InsuranceRegulation has licensed 27 new homeowners insurance companies since2006, and that is great news for the property insurance market inFlorida,” remarked Florida Insurance Commissioner Kevin McCarty.“It is proof that the private insurance industry believes it cansucceed and be profitable in Florida by offering competitivelypriced products.” The OIR said that as of March 31 (the end of thefirst quarter), these companies reported 450,000 personalresidential policies in force, representing a 10 percent share ofthe residential property insurance market in Florida.

Additional data from OIR for the same time period revealed that569,018 personal residential policies were cancelled or non-renewedfor calendar year 2008. The notable companies declining to write orrenew coverages were Allstate Floridian, State Farm Florida,Nationwide Florida, and USAA (except for active militarypersonnel). However, in the same quarter, 524,726 new personalresidential policies were written, bringing total in-force personalresidential policies to 6,110,347.