Fla. Sees No Reason To Reverse Nix Of State Farm Rate Hike

Florida’s top regulator said today that State Farm Florida’s petition for a formal hearing on his agency’s announced plan to disapprove the carrier’s request for a 47.1 percent statewide average homeowners insurance increase has been rejected.

Insurance Commissioner Kevin McCarty issued the Office of Insurance Regulation’s notice of intent to disapprove the proposed rate hike on Aug. 25.

State Farm now has until Sept. 15 to amend its petition and resubmit it to the OIR. If State Farm fails to file a sufficient petition within the 10 days, it will not be entitled to a hearing, OIR said.

The company also could withdraw its rate filing and make a new filing that is appropriately supported in compliance with Florida law, OIR added.
Explaining his action, Mr. McCarty’s office said in a statement that State Farm was required by law to set forth disputed issues of material fact in its petition, as well as cite specific statutes or rules it believes supported its request for reversal or modification of the office’s notice.

The OIR, it was noted, is empowered by law to reject the petition if it believes the company has not properly specified any disputed material facts.

“State Farm’s petition for hearing was incomplete,” said OIR General Counsel Steve Parton. “In our opinion, they did not demonstrate that there were any material issues of fact in dispute. They basically just said that they disagree with the reasons we gave in the Notice.”

Meanwhile, the company’s 9 percent rate reduction, which became effective in accordance with an Oct. 1, 2007, agreement, remains in effect.

In a March 2007 filing, State Farm initially planned to reduce its rates by 7 percent, but agreed to reduce them by an additional 2 percent. State Farm received a 52.8 percent overall average increase in late 2006.

Last month, in rejecting the State Farm rate proposal, the OIR cited 20 reasons, including the assertion that the company failed to demonstrate that the net reinsurance costs included in the filing did not result in excessive costs, in violation of the rating law.

The OIR also cited the profit and contingency factor, as well as the additional retained hurricane risk load used in the filing. The retained hurricane risk load was previously allowed by law, but that provision was repealed in Senate Bill 2860, the OIR said.

The OIR said State Farm still cannot implement the proposed rate increases, because Senate Bill 2860 also prohibits companies from implementing rate hikes through the "use and file" process, through Dec. 31, 2009.