Louisiana Insurance Commissioner rejects a rate revision filed by State Farm

Louisiana Insurance Commissioner Jim Donelon has rejected a rate revision filed by State Farm that would have raised homeowners insurance rates by a statewide average of 19.1 percent.

After reviewing the request, filed in December 2009, the Louisiana Department of Insurance determined the increases, which would provide the company with an estimated $67,625,043 in additional premiums, were unreasonable and that in its filing, State Farm relied on an excessive loss trend, as well as an unreasonable hurricane risk provision.

Regulators noted State Farm relied heavily on the latest version of the EQECAT hurricane model in justifying its revision. The EQECAT model’s projected hurricane loss provisions are 150 percent higher than projected hurricane loss provisions in two other industry hurricane models used by State Farm in this filing, without adequate supporting evidence, the department said.

“In this case, State Farm Fire and Casualty falls short of proving the need for an increase of this magnitude,” Donelon said in a statement.

With a market share of 27 percent, State Farm is the largest homeowners policy provider in the state. The company received an average 8.3 percent increase last year in Louisiana after asking for 13.7 percent.

Meanwhile, in Florida, where State Farm also dominates the property insurance market, policyholders are seeing increased premiums – but not as a result of the 14.8percent rate increase the state Office of Insurance Regulation (OIR) approved in December, part of an agreement to keep the insurer in Florida.

Many customers have lost marketing discounts that could cause premiums to rise in addition to the pending 14.8 percent rate increase. The subsidiary of State Farm Mutual Insurance Co. announced last July that it would discontinued the discounts in an effort to bolster the company’s solvency.

“The notice to the customer is the renewal notice,” said State Farm Florida spokesman Justin Glover. “That way they have time to look at the renewal notice before the bill is due.”

Multi-line and claims-free discounts, among others, will no longer be offered for customers who also insure their autos through the firm. Because of the change, policies renewed beginning in December increased by a statewide average of 28 percent.

OIR spokesman Jack McDermott acknowledged that State Farm notified state officials of the plan to discontinue the market discounts, and that the state does not regulate such discounts.

”There’s no requirement they tell you exactly what discounts are discontinued,” he said. ”They just need to notify the office if there is a premium effect.”

Both Glover and McDermott recommended that State Farm Florida customers contact their insurance agents to confirm their policy information.

On February 1, State Farm began sending out letters of nonrenewal to thousands of homeowners.

The 125,000 dropped policies are part of the settlement reached with the OIR. The company claimed it needed to dramatically reduce its hurricane exposure in the state to remain solvent.

The notifications, to be sent out on a rotating basis, give policyholders at least six months to find another insurer.

Most of the policies will be dropped on the west coast of Florida rather than in South Florida, as State Farm no longer insures many homes in the area.

At least 13 companies, including American Integrity, Florida Peninsula, Security First and United Property & Casualty, have been approved by State Farm to work with its agents to provide new coverage for the policies being dropped.