The state will deny a planned home insurance rate increase by Florida Farm Bureau’s two property insurance companies, which have about 140,000 homeowners policies, the Office for Insurance Regulation said.
Florida Farm Bureau said it likely will challenge the state’s denial of its proposal to increase rates by as much as 30 percent on average for some customers, based on what the company said is its need to purchase additional backup coverage against the possibility of a catastrophic hurricane.
Insurance regulators held a rate hearing last week on the proposed increases by Florida Farm Bureau Casualty Insurance Co. and Florida Farm Bureau General Insurance Co.
Legislators passed a new law in January that required companies to file for lower “presumed” rates based on what they would save by buying cheaper backup coverage through the state’s Hurricane Catastrophe Fund. Based on that requirement, Farm Bureau companies filed for a rate decrease of about 24 percent.
But later when the company calculated its actual expected costs after it had purchased reinsurance, it filed for a new higher rate, up about 30 percent from the lower “presumed” rate.
Company officials say the proposed rate is still about 1.6 percent lower on average than previous rates for most customers. The only customers seeing a huge increase are those who had already started paying the lower “presumed” rate because they renewed their coverage in between the two filings.
Insurance Commissioner Kevin McCarty said regulators believe Farm Bureau is carrying too much private backup reinsurance.
“What we discovered from the testimony at the hearing was that the company made a business decision to reinvest $6 million in added reinsurance rather than passing the savings on to their policyholders,” McCarty said. “The intent of the law that came out of the January special legislative session was to give companies less expensive reinsurance from the state and to pass on that savings to their policyholders.”
Florida Farm Bureau officials said the organization was simply being prudent to make sure it would be able to pay claims in the event of a major storm.
“FFB has consistently tried to purchase reinsurance to (protect against) roughly a 1 in 250 year event,” the Farm Bureau said in a statement. “Therefore, when the 2004 and 2005 storms hit we were able to keep our promises to our members and remain solvent.
Florida Farm Bureau CEO Bill Courtney said the company was doing everything it could to keep insurance affordable, and pointed to a new state insurance premium comparison Web site to show it.
“Of the 23 companies listed, our rates rank low, if not very low, in an overwhelming number of the 67 counties,” Courtney said. “In Polk County our rates are over $900 lower than the company with the highest premiums, in Hillsborough we are over $2,300 less, and in Escambia we beat the highest rates by over $4,000.”
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