Politics

State Farm to give refunds

The deal with the state calls for slightly deeper rate cuts. The governor says he'll press for more.

By JENNIFER LIBERTO and HELEN HUNTLEY, Times Staff Writers
Published October 3, 2007

TALLAHASSEE - State Farm and the state declared a truce Tuesday that will result in modest refunds for the 1-million Florida homeowners the company insures.

State Farm, the state's largest private insurance company, agreed to deepen previously proposed rate cuts, resulting in a savings of $23-million, or an average of $23 for each policyholder. The savings are part of a larger agreement ending a number of very public battles State Farm has been waging with the Office of Insurance Regulation and the Attorney General's Office.

"We really want to be part of the solution and not part of the problem, and this agreement shows we're committed to Florida and Florida customers," said Chris Neal, State Farm spokesman. "Our goal is to provide insurance coverage to as many customers as our resources will allow."

Gov. Charlie Crist said that the settlement sounded good but that he plans to continue to press State Farm, as he has done since he got into office.

"From what I've been briefed on, it sounds like it's the right thing to do," Crist said, adding, "I'd like to see more of a reduction. ...We have to keep pushing."

In March, State Farm Florida said it would cut homeowner rates by 7 percent as a result of new laws passed during the insurance special session. Regulators had challenged that cut and asked for a cut of 11 percent.

Partly to avoid two days' worth of televised rate hearings, State Farm agreed on Tuesday to a 9 percent cut, which means it will return $23-million to customers who have already paid their insurance premiums based on the 7 percent rate reduction.

State Farm plans to send its customers refund checks.

Even with the cuts, State Farm's rates will remain among the most expensive in the Tampa Bay area, according to state figures.

The settlement touched on a variety of other issues that State Farm has been discussing with regulators.

The company agreed to change the way it plans to drop some 50,000 coastal policyholders. Originally the insurer had planned to give special treatment and not drop homeowners if they also had an auto policy with State Farm. As a part of the agreement, State Farm auto policyholders are going to face the same risk of losing their homeowner policy as any other State Farm policyholder.

State Farm plans to return to some customers another $23-million in over-collected assessments, which they had charged in conjunction with a state-required plan to shore up Citizens Property Insurance back during the 2004-2005 season.

State Farm notified the Office of Insurance Regulation earlier this year that it collected too much in Citizens assessments and that it needed to return that money. That also translates into about $23 a person, money that Neal said State Farm had always intended to give back.

Also, some 35,000 auto insurance customers could get $100 to $200 back, because they had been insured by a State Farm affiliate that charged higher auto insurance rates.

State Farm also agreed to pay the Office of Insurance Regulation and the Attorney General's Office some $1.5-million in attorneys fees and investigative costs.

In return, the Office of Insurance Regulation agreed to cancel two days of televised rate hearings, in which its actuaries would have grilled State Farm employees in the same way they've been grilling other insurers who haven't reduced rates for homeowners to levels acceptable to regulators.

The deal came as somewhat of a surprise, because tensions have run high between the insurer and state regulators as well as Crist, who has criticized the company with regularity.

While State Farm's rate cuts are far better news than a rate increase would have been, the reduction is still far less than politicians and homeowners had hoped would result from this year's insurance legislation. Bob Hunter, director of insurance for the Consumer Federation of America, had calculated in March that homeowners could save an average 24 percent on their premiums, based on legislation passed in January.

That proved to be an illusion. While some small companies have made rate cuts that size, most of the large ones have made small reductions or asked for increases. Allstate and USAA both have filed for double-digit increases.

"Allstate stands by the rate that we filed," spokesman Adam Shores said Monday. "We believe it accurately reflects the risk we are assuming. A lot of what you're seeing this year reflects the fact that we weren't able to get all of last year's rate that we needed."

USAA, which is asking for a 51 percent rate increase, said its rates are among the lowest in the state. "Even if that rate increase was granted, we'd still be at the median price," spokeswoman Lynne McChristian said. The company writes policies for homeowners serving in the military.

All rate filings have to be approved by regulators.

Fallout from insurance reforms

This chart shows how Florida's largest insurers responded to this year's property insurance reforms, which allowed them to buy more backup insurance from the state. The companies all initially proposed rate cuts, which were implemented several months ago. Since then some have proposed more cuts while others have said they need increases.

Company Market Initial Final Total proposed Status

share* rate cut request change

Citizens Property & Casualty20%-14.1%-----14%Approved

State Farm Florida16.5%-7%-2%-9%Approved

Allstate

Floridian Insurance4.7%-14.2%41.9%27.7%Pending

Floridian Indemnity1.4%-13.2%28.3%15.1%Pending

Universal Property & Casualty5.4%-12.1%-1.0%-13.1%Pending

Nationwide Insurance3.5%-6%-15.9%-21.9%Pending

USAA3.2%-3.1%53.9%50.8%Pending

* of total residential property insurance market

[Last modified October 2, 2007, 23:31:30]