Fla. Says 3 Insurers' Rate Cuts Insufficient

The Florida Office of Insurance Regulation announced it has denied the rate requests of three home insurers, saying they had not substantially lowered rates as required by the state's recently revised insurance law.

Under the changes enacted in January, primary insurers are able to secure reinsurance at discount rates from the Florida Hurricane Catastrophe Fund and the savings are to be passed on to policyholders.

The insurers involved are:

o First Floridian Auto and Home, which offered an 8.3 percent cut for its 91,295 customers. The company recently changed its name to Travelers of Florida.

o Cyprus Property and Casualty, which proposed a 5.4 percent rate cut for its 63,129 policyholders.

o Travelers Indemnity Company of America, calling for an 8.3 percent rate reduction for 4,596 insureds.

Reacting to the state's action, Nancy Baily, president and chief executive officer of Travelers of Florida, said, "We believe that our rate filing was consistent with Florida law. We look forward to working with the Office of Insurance Regulation to address all of their concerns regarding this matter."

Insurance Commissioner Kevin McCarty said that Governor Charlie Crist and the Legislature by enacting the legal changes during the special session in January had made "some courageous decisions," and "we will not allow companies to file incomplete or inadequate rate reductions affecting the policyholders of this state."

The office said it has sent notices of intent to deny the rate filings because the reduced rates filed did not adequately reflect all of the savings realized when the state offered less expensive reinsurance to companies last spring.

"House Bill 1A made $12 billion of less expensive reinsurance available from the state, and the law requires the insurance companies to pass along that savings to their policyholders in the form of lower rates," said Mr. McCarty. It is "not to be invested in extra, duplicative reinsurance contracts or profit margins."

Companies have until Sept. 30 to submit their final reduced rate filings mandated by the law, and the office will continue to review each one to ensure they are complete and reflect the policyholder savings ordered by the Legislature, Mr. McCarty promised.

His action is the latest in a series of rejections of Florida insurers' rate filings, some of which are under appeal. Companies have said they made purchases of reinsurance before the legislation went through and were locked into contracts with private reinsurers.

Mr. McCarty's office has also issued subpoenas for State Farm Florida Insurance Company, State Farm Florida Fire and Casualty Insurance Company, and State Farm Mutual Automobile Insurance Company to appear and answer questions about their business practices.

The hearings slated to take place at the state capitol in Tallahassee were postponed last week after the office said the companies had failed to provide all of the information requested in the subpoenas they were issued. Hearings were postponed, the commissioner said, until the requested information is provided in its entirety.

Mr. McCarty's office noted that he has the authority to hold a public hearing to question a company about their filing pursuant to Florida law. The schedule of upcoming public rate hearings and the television schedule to see them are located on the office's Web site at http://www.floir.com/pcfr/RateHearings.htm. This article updated Aug. 15, . 11:36 a.m.