Florida Rate Cut Doesn’t Materialize
Florida Governor Charlie Crist signed legislation six months ago aimed at lowering property insurance premiums, telling homeowners they would finally see some relief from insurance bills that have spiraled out of control due to hurricanes. Instead, proposed average rate increases offer anything but relief: 30 percent from Florida Farm Bureau, 94.8 percent from Sentry Insurance and 53.9 percent from USAA, which provides coverage for military families.
State officials had promised rates would drop about 25 percent on average because the new law allows insurers access to inexpensive, state-backed reinsurance, and requires insurers to pass on those savings to their policyholders. However, the average final rate filing under the new law has been for an increase of just over 30 percent, according to insurance officials.
The second-largest home insurer in Florida, State Farm, announced plans to decrease rates by about 7 percent on average. However, state regulators told the company to reconsider, saying the insurer’s rate cut should be closer to 11 percent. According to state Insurance Commissioner Kevin McCarty, the company's decrease should be closer to 11 percent.
No increase has been approved yet and McCarty suggested many may not be approved. His office has already rejected the Farm Bureau increase. McCarty says, "We fully expect the companies to provide the rate relief anticipated by the Legislature."
In reply, Sam Miller, a spokesman for the Florida Insurance Council, which represents several insurers, said "Most insurers made no specific promises. In fact, insurers repeatedly sounded a note of caution about the real world impact of the law on policyholder premiums, so as not to raise unrealistic expectations."
State Farm was one of the companies that from the beginning publicly questioned the state's assertion that there would be cuts of more than 20 percent for many homeowners. Company officials said during legislative debate in January that State Farm would likely file for a decrease of about 7 percent. "We promised and we delivered, so there's no game going on here," said Mark Delegal, a lobbyist for State Farm.
Delegal said, "When the wind blows and the damage is caused, (companies) are obligated to pay the loss. Our contract says if the damage is caused by a hurricane, we pay it. What we do as an industry, and as a company, is make sure we're financially able to make good on our contractual obligations."
Published on August 6, 2007
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