The Florida Office of Insurance Regulation announced its intention yesterday to disapprove State Farm Florida's requested rate increase that would raise homeowner insurance rates 47 percent on average.
State Farm Florida, which is currently not writing new home insurance business in the state, said it sought an increase from the State Office of Insurance Regulation to "cover the expected costs of loss and operating expenses." Last year the carrier cut its home insurance rates by 9 percent.
Under the carrier's latest rate request, some homeowners would see significantly higher increases, while others would have lower increases. For example, the increase was as low as 19 percent for Pasco County beside the Gulf of Mexico, and as high as 88 percent in Flagler County on the Atlantic, which encompasses Daytona Beach.
The OIR held a hearing on the proposed increase, during which State Farm Florida stated its reasons for seeking an increase, including the cost of reinsurance and recent legislation that mandates discounts for mitigation efforts to strengthen homes against storms.
Regarding the legislation, State Farm Florida said it had already accounted for some of the building code mitigation efforts in its data and had to give further discounts to comply with the legislation without a commensurate reduction in risk to comply with the law.
In announcing OIR's decision to reject the increase, Deputy Commissioner Belinda Miller said in a statement, "The office thoroughly reviewed State Farm's filing and the testimony the company gave at the Aug. 12 public hearing. State Farm did not provide appropriate support for the rate increase it requested."
Among the 23 reasons given for rejecting the increase, the OIR said, "The rate filing and requested rate fail to reflect a reduction in policyholder premiums consistent with the expansion of the Florida Hurricane Catastrophe Fund coverage…," and "[the company] has not provided sufficient support that the reinsurance cost in the filing reflecting reinsurance premium amounts and expected recoveries does not result in excessive reinsurance cost related to services rendered…."
The OIR also said the company did not provide all of the information necessary for the increase filing, and that the filing does not reflect the impact of policyholder wind mitigation efforts.
Two of the OIR's reasons also questioned the catastrophe modeling methods used by State Farm Florida in its request. State Farm had compiled its request by taking three catastrophe models that are accepted in Florida and averaging the data from the trio.
At the hearing, regulators had questioned whether the resulting numbers technically constituted a fourth, unapproved model, and that reasoning resurfaced in the recent notice.
The OIR said State Farm had not shown that the average of three models complies with the law requiring use of an approved model.
At the hearing, State Farm representatives said the company had used the average to be as fair as possible, rather than using just the highest approved numbers.
According to the OIR, State Farm has 21 days to petition for an administrative hearing, if it chooses. The company did not immediately respond to a request for comment.
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