In the Florida Home Insurance Market, State Farm is calling for a statewide increase of 27.7% on average. They are naming increased sinkhole claims as the reason for these price hikes. This request is coming as Florida officials are trying to negotiate a deal over how to address the rising cost of sinkholes in preparation for its legislative session which will take place on March 8, 2011.
Chris Neal, State Farm Florida Home Insurance Representative stated that the largest factor causing the rate request is the increasing amount of non-catastrophe losses, which over the last three years has risen by 94 percent. “The way things are going we may have to consider sinkholes a catastrophic loss,” said Neal.
Florida home insurance companies have seen a steady increase of non-catastrophe losses since 2007. The carrier paid out $47 million in sinkhole claims in 2007 and in the first three quarters of 2010 paid out more than $119 million.
Although State Farm Florida recently reached a deal with regulators to keep the insurer in the state, their next move was the filing of this rate increase. While Florida home insurance was becoming a scarcity, in 2009 State Farm threatened to leave the market entirely just after regulators prohibited a 47 percent rate increase. The possibility of the insurer dumping 800,000 policies forced regulators to sign off on a deal which enabled the insurer to drop 125,000 policies while eliminating or reducing certain policyholder discounts. The deal also gave the Florida home insurance company the right to raise rates by 14.8 percent across the board.
State Farm representative stated that the deal met their objective in steadying the carrier’s finances. “It gave us some rate relief and allowed us a way to manage our expenses that was critical at the time,” said Neal.
The Office of Insurance Regulation is holding a public hearing on State Farm’s latest filing February 15.