State Farm Seeks 27.7% Increase in Florida Homeowners Rates

Strategic Insights -

State Farm has filed a request to increase homeowners rates by an average of 27.7% in Florida, citing rising noncatastrophe costs, specifically sinkhole claims. The insurer has paid out some $351 million in sinkhole claims from 2007 to 2010, with a significant increase in claims reported in parts of south Florida. The Office of Insurance Regulation found that sinkhole claims tripled in Florida between 2006 and 2009, with costs surging to $406 million in 2009. In response, Republican State Sen. Garrett Richter has introduced comprehensive property/insurance reform legislation that would remove the requirement for insurers to offer sinkhole coverage and revise what constitutes a sinkhole loss.

Key Takeaways:

  • State Farm is seeking a 27.7% increase in homeowners rates in Florida due to rising noncatastrophe costs, specifically sinkhole claims.
  • The insurer paid out $351 million in sinkhole claims from 2007 to 2010.
  • Sinkhole claims tripled in Florida between 2006 and 2009, with costs surging to $406 million in 2009.
  • The Office of Insurance Regulation (OIR) found that 66% of claims are concentrated in three counties: Hernando, Pasco, and Hillsborough.
  • Republican State Sen. Garrett Richter has introduced comprehensive property/insurance reform legislation to address the issue of sinkhole claims.
  • The bill would remove the requirement for insurers to offer sinkhole coverage and revise what constitutes a sinkhole loss.
  • State Farm's noncatastrophe loss per policy is up 94% in the past three years.
  • State Farm stopped writing new business in Florida in February 2008 and is shedding 125,000 policies in the state.
  • The insurer had about 678,000 property insurance policies in Florida as of September 30, 2010.

Statistics:

  • $351 million: the amount paid out in sinkhole claims by State Farm from 2007 to 2010.
  • 27.7%: the average rate increase requested by State Farm in Florida.
  • $406 million: the cost of sinkhole claims in Florida in 2009.
  • 66%: the percentage of claims concentrated in three counties: Hernando, Pasco, and Hillsborough.
  • 94%: the increase in State Farm's noncatastrophe loss per policy in the past three years.
  • 125,000: the number of policies being shed by State Farm in Florida.
  • 678,000: the number of property insurance policies State Farm had in Florida as of September 30, 2010.

Sources:

  • A.M. Best Company, Inc. (via COMTEX)
  • BestWire (November 11, 2010)
  • BestWire (June 2, 2010)
  • Office of Insurance Regulation (OIR)