A State Farm rate increase appears in jeopardy after regulators grilled company officials for hours about a request to jack up rates in Florida by 47.1 percent.
Florida’s insurance consumer advocate office told regulators that they should reject the increase because State Farm has not justified why such a large rate increase is needed. Gov. Charlie Crist also said he hopes that Insurance Commissioner Kevin McCarty kills the proposed rate increase.
“Enough is enough,” said Crist. “I’m very pleased with Commissioner McCarty’s work. I think he’ll handle this case appropriately and I think you know what I mean by that — rejecting it, the increase.”
State Farm defended the rate request, saying the money is needed to pay for future hurricanes and to make up for discounts they are handing out to customers who add hurricane shutters and make other home repairs. State Farm has roughly 1 million customers in the state.
“Mother Nature has made all of our lives difficult and we cannot control the number or intensity of hurricanes that could make landfall this year or next year,” said Jim Thompson, president of State Farm Florida.
State Farm asked for the rate increase in July, which ranges from a low of 23 percent in inland counties like Polk to as high as 86 and 88 percent in Collier and Flagler counties. But thanks to a recent change in law, State Farm cannot start charging the higher rate automatically.
If McCarty denies the rate increase, State Farm can appeal the decision to an administrative law judge.
Regulators at a public hearing peppered State Farm with questions about how much money its national parent company was earning and how much it would cost to pay for future storms. State regulators and State Farm officials even disagreed over whether global warming was going to spawn more hurricanes that could slam into the state.
Steve Alexander, an actuary for Florida’s consumer advocate office, said the rate increase should be rejected because State Farm was trying to recover money it had spent on past hurricanes. Eight hurricanes hit Florida in 2004 and 2005.
State law says rate increases must be based on future losses.
Tina Risley, a State Farm customer for the last 36 years who attended the Aug. 12 hearing, also said regulators should reject the request.
“I think they really don’t show a lot of good evidence why it’s necessary,” said Risley, a hospice nurse who lives in St. Petersburg. “I’m getting the impression that they are not very credible with what they are giving.”
During the hearing, a top State Farm executive said the insurer planned to drop either all, or part, of the coverage now offered to thousands of policy holders. But a State Farm executive said later that was wrong.
State Farm agreed late last year to drop no more than 50,000 policies belonging to customers who live roughly within one mile of the Florida coast.
“We are very confident that we are in full compliance (with the agreement),” said State Farm spokesman Chris Neal.
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