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State Farm blames Florida regulator for premium hikes

State Farm Insurance has blamed the Florida authorities for its decision to seek premium increases of nearly 50 percent across the state for homeowners insurance.

State Farm Insurance Florida lodged its petition on 16 July and the Florida Office of Insurance Regulation (FOIR) now has 90 days to review the request, with a public hearing scheduled for 12 August.

The insurer, Florida’s second-largest provider of home insurance behind Citizens Property Insurance, is seeking to raise homeowner rates by almost 70 percent in some parts of Palm Beach County, and almost 63 percent in parts of the Treasure Coast, with an average hike of 47.1 percent overall.

A spokesman for State Farm told The Insurance Insiderthat one of the main reasons behind the request is a state order made in June 2007 requiring a doubling of discounts for homeowners who harden their homes against hurricanes. State Farm claims this order has had a deleterious impact on its bottom line.

Initially, the insurer expected that 45,000 homeowners would take advantage of the discounts, but the number is now 250,000 and growing, it says, reducing its projected premium income per householder from $2,154 to $1,565.

The State Farm spokesman also blamed the lack of availability of reinsurance under the current catastrophe fund arrangements.

“When we seek reinsurance we need it on a large level, and the state didn’t have enough to cover us for our probable maximum loss, so we have had to pay premiums to reinsurers as well,” the spokesman said.

However, Ed Domansky, as spokesman for the FOIR, denied the accusations.

“To my mind there’s no limitation on the availability of reinsurance,” he said, also pointing out that State Farm gained approval for a 52 percent rate increase for homeowners in 2006, which was reduced by 9 percent last year.

State Farm is not alone in seeking substantial premium hikes this year. Florida Farm Bureau is also seeking a 28.4 percent increase for homeowners insurance.

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