NU Online News Service, Jan. 31, 12:00 p.m. EST
State Farm Florida has asked regulators to approve a statewide average homeowners insurance rate hike of 27.7 percent.
The insurer, which not so long ago reached an agreement with regulators to remain in the state after threatening to leave, said its latest rate request is due to rising costs unrelated to hurricanes.
The state's largest private property insurer said sinkhole claims "are up dramatically," and a rate increase is needed to protect customers and "adequately reflect the risk" of providing insurance in Florida, said spokesman Chris Neal.
Mr. Neal said the filing was done to comply with state law that requires an end-of-year submission. He said the insurer's rise in sinkhole claims basically mirrors what was found by the Florida Office of Insurance Regulation (OIR). The OIR found sinkhole claims are on the rise and are coming from places where they have not previously been an issue.
State Farm Florida, which had about 678,850 policies as of Sept. 30, 2010, spent $119 million on sinkhole claims as of the end of October 2010, compared to $47 million for 2007, Mr. Neal said.
The OIR will review the filing at a hearing Feb. 15.
Mr. Neal said State Farm Florida's settlement with state regulators in late in 2009 "has done what it was intended to do."
Mr. Neal explained, "It stabilized finances and lowered our exposures to more manageable levels."
However, the deal did not take care of all issues the insurer faces to write in the Sunshine State. As part of the agreement, State Farm Florida was given a 14.8 percent rate increase and was allowed to not renew 125,000 policies. Mr. Neal said the last of the nonrenewal notices were to go out by the end of January, with the last renewal occurring in early August.
Prior to the settlement, State Farm had asked for a 76 percent rate increase, and filed plans to withdraw from the state when a judge upheld the OIR's denial of the request. At the time, the insurer said it faced insolvency by the end of 2011 if things didn't change.
According to Highline Data, State Farm Florida posted an $84.2 million income loss as of the end of the 2010 third quarter. The insurer was in the red $180.4 million at the end of 2009 and $184.5 million after 2008.
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