State Farm raising its rates

Arbitrators overrule Florida's insurance commissioner and okay the increase of some 7 percent, which affects hundreds of thousands of homeowners.

By JEFF HARRINGTON

© St. Petersburg Times, published July 8, 2000

After a brief respite, homeowners' insurance rates in Florida are on their way up again.

State Farm, which insures nearly a third of all homes in the state, has won approval to raise rates an average of 7 percent, its first increase in three years.

The average premium will go from $552.73 to $591.63.

The decision affects hundreds of thousands of homeowners, some of whom watched their premiums double or triple as their coverage dwindled after Hurricane Andrew in 1992.

In February, Insurance Commissioner Bill Nelson rejected State Farm's new rate request as unfair and unjustified. But now he has been overruled by a three-member arbitration panel.

"They based this on the projection of hurricane losses by two private computer models. They did not present any historical evidence to back it up," said Insurance Department spokesman Don Pride. He said the department did not find out about the panel's June 29 decision until this week.

Pride acknowledged that the decision is likely to be final because there are no apparent grounds to mount a legal challenge.

Nelson, who is running for the U.S. Senate, has crusaded against the arbitration panel, claiming it is controlled by the insurance industry. Most recently, he has been waging an unsuccessful legal fight to overturn the panel's approval of increases that would nearly double rates for the state-run windstorm insurance pool.

With 938,540 policies statewide, State Farm commands about 32 percent of the Florida market.

When the company last raised rates in 1997, the Illinois insurer agreed to Nelson's request for a two-year moratorium on increases. At the time, homeowners were still reeling from paying two or three times more for coverage after Hurricane Andrew.

State Farm carved out a separate Florida subsidiary to isolate its risk from a major hurricane, then came back early this year arguing for higher rates.

A handful of smaller players received approval from the arbitration panel earlier this year to raise rates over Nelson's objections. First Floridian was approved for an average 11.8 percent increase in February. USAA and USAA Casualty were cleared for 7.7 percent increases in April.

There may be more: The state's second-largest home insurer, Allstate, has not yet filed a request.

State Farm's rate changes vary by county, reaching as high as 21.9 percent for Santa Rosa County. In 16 counties, rates are unchanged on average, and some individual policyholders should even see rate cuts.

Coastal areas and the Panhandle appear to bear the brunt of the higher premiums.

In Pinellas County, for instance, rates will go up 7.3 percent on average. Across the bay in Hillsborough County, the average increase is less than 1 percent.

As part of the change, State Farm will begin offering a 2 percent discount to homeowner policyholders who also have a private passenger auto policy with the company. It also has created a new rating plan that is designed to offer better prices to customers who have fewer non-weather and non-catastrophe claims.

The effective date of the rate changes has not been determined.

© St. Petersburg Times. All rights reserved.