|August 1, 2012|
Previously published on July 25, 2012
Today, July 25, 2012, the Florida Office of Insurance Regulation ("OIR") held a public hearing for a rental dwelling filing from State Farm Florida Insurance Company ("State Farm"), which is requesting a statewide average rate increase of 58 percent. The OIR is required to hold a hearing on any filing with a rate increase that is greater than 15 percent.
The OIR officials presiding over today's hearing included OIR Property and Casualty Product Review Director Sandra Starnes, Actuary Bob Lee and Assistant General Counsel Ken Tinkam. Brian Deffenbaugh, Senior Counsel for the Office of the Florida Insurance Consumer Advocate was also in attendance.
The State Farm representatives on hand for the hearing did not offer opening comments. Instead, Mr. Lee asked them a series of questions relating to the filing. The following information was ascertained from the representatives' answers to these questions:
- State Farm's filing is for rental dwellings, which includes structure of the property.
- Many of the properties would sustain rate increases in excess of 100 percent.State Farm considered, but did not cap the rate increases.
- Sinkhole exposure could be reduced, since the properties will be subject to an inspection and sinkhole insurance may not be offered. The potential future benefit of this factor is not reflected in the filing according to Mr. Lee.
- The OIR is requesting the insurance contracts between State Farm and its agents.
- According to State Farm, the profit provision in the filing is reasonable. It is higher in Florida than other states because the catastrophic risks are higher. Furthermore, State Farm does not reinsure all of that risk.
- The sinkhole data in the filing does not reflect policy changes authorized in Senate Bill 408, including the two-year statute of limitations provision.
Mr. Lee expressed concerns with the rate indications of policies without wind coverage. The rate filing assumes all policies have wind coverage and those that do not are discounted.
Mr. Deffenbaugh noted the magnitude of the rate increases is troubling. He further expressed concerns with the profit and contingency factor provided. Specifically, he stated his concern that State Farm is not actively seeking to write new business Florida and went on to seek State Farm's rationale for the 8.5 percent profit factor for the surplus note from its parent company.
The State Farm officials stated the $750 million surplus note is owed to their parent company and is a known expense. Therefore, it is included as an expense and is not a duplicative profit and contingency factor.
Mr. Deffenbaugh and the OIR officials also expressed the view that State Farm should actively seek to write new business if it is seeking significant rate increases.
A representative of the Florida Justice Association testified at the hearing. He noted with concern that public attendance was minimal and urged hearings in other parts of the state. The OIR officials noted there is ample opportunity for the public to comment both in writing and at the hearing. OIR has held hearings in other parts of the state that were not heavily attended.
The hearing adjourned following the public testimony.