News Briefs

FLORIDA

State Farm of Florida 8.6 Percent Rate Request Approved

The Florida Department of Insurance approved an average statewide premium rate hike of 8.6 percent for State Farm of Florida, the largest insurer of homes in Florida, insuring one out of every five homes. For some South Florida residents and in some parts of the state, however, the increases could top more than 40 percent, depending on the location.

To protect consumers who will see the increases, State Farm and insurance regulators agreed to cap increases at 42.5 percent, regardless of the rate approved by the state.

Jose Soto, State Farm spokesman told the Miami Herald about 138 policyholders across the state could see premium increases that hit that upper limit.

In Miami-Dade County, the average increase for homeowners in coastal areas is 37.9 percent. Yet policyholders in Hialeah and other western sections of the county could see no increase at all.

The same applies for Broward Countyy: possibly no increase for West Broward and an average 39.7 percent hike for residents in the mid-section of the county.

More than a dozen companies have increased their rates since the storms. Nationwide Insurance of Florida, the state’s fourth largest home insurer, Citizens, Southern Family, Metropolitan Property and Casualty, and Sentry Insurance were granted double-digit increases in some parts of the state. Nearly two dozen other insurers have rate increase petitions pending.

Condo Associations Urged, Use Mediation, Settle Disputes

A mediation program to help condominium associations resolve disputes over hurricane claims has been suggested by Tom Gallagher, Florida CFO. He said the mediation program, established for homeowners after the 2004 storms, successfully helped more than 11,000 storm victims reach satisfactory settlements.

The mediation program offers a dispute resolution process for condominium associations and other commercial residential properties to resolve hurricane claims prior to pursuing other options such as going to court. The mediations are free of charge and using the program does not preclude an association’s right to take the dispute to court or to invoke the policy appraisal clause.

When the department receives a request for mediation the insurance company is informed it has 21 days to settle the claim, or will have to appear at mediation with the policyholder or its legal representative. Mediation meetings will be facilitated by Supreme Court-certified mediators provided through the Collins Center for Public Policy.

Gallagher Backs Cat Fund

A National Catastrophe Fund that would provide assistance for insurance claims in Florida has been endorsed by Tom Gallagher, Florida’s CFO. Gallagher’s recommendations came after officials, including Florida Insurance Commissioner Kevin McCarty, met in San Francisco at a National Catastrophe Insurance Summit and recommended the fund’s establishment.

The officials met to discuss the development of a program that would help provide coverage for the entire nation in the event of catastrophes.

Gallagher told the West Palm Beach Post he advocates several federal and state solutions and the creation of a national catastrophe fund. U.S. Reps. Ginny Brown-Waite and Clay Shaw of Florida recently introduced legislation to create such a fund.

As part of a multi-faceted package to address insurance issues, Gallagher advocates federal and state solutions. At the federal level, Gallagher is urging Congress to establish a national catastrophe fund and to create individual catastrophic savings accounts to allow homeowners to save tax-free for deductible and storm recovery costs.

He is also recommending that Congress pass legislation introduced by U.S. Rep. Mark Foley, who represents much of the Treasure Coast, to allow the accumulation of tax-deferred catastrophic reserves by insurers.

On the state level, Gallagher is asking the legislature to earmark the sales tax revenue collected from hurricane recovery to help offset assessments against homeowners. Gallagher also called for standardizing Florida’s building code statewide and capping coverage of homes at $1 million or less in Citizens Property Insurance Corp., the state’s insurer of last resort.

MISSISSIPPI

Miss. Farm Bureau Mutual Insurance Dissolving

Jackson-based Mississippi Farm Bureau Mutual Insurance has an-nounced that the strain of paying $450 million in claims after Hurricane Katrina has caused the company to cease writing policies in the state and transfer current policies to the Southern Farm Bureau Casualty Co. In early December, 240,000 policyholders were offered the chance to switch their insurance to Southern Farm Bureau Casualty.

According to David Waide, MFB president, all policyholders’ interests will be protected while the mutual is dissolved in 18 to 24 months. Waide said customers will be able to continue their coverage from all their policies. The change will have no affect on the company’s 350 employees.

Private insurance claims for Katrina have reached $3.6 billion in Mississippi. About $1.3 billion of that is in the coastal Harrison, Jackson and Hancock counties.

Mississippi Farm Bureau, the second-largest insurer behind State Farm, has paid 730,000 claims.

“We intend to maintain that market share even after Katrina,” Waide told the Jackson Clarion-Ledger.

Mississippi Insurance Commissioner George Dale said larger multi-state firms have more customers to absorb the impact of Katrina. He said the company’s largest loss before Katrina was $30 million from Hurricane Georges in 1998.

“This is a (Jackson) Mississippi-based company,” Dale said. “The pressure on them is they do not have premiums in other states.”

The Farm Bureau owns both mutual insurance and casualty insurance companies. The difference between the two is in financial structure.

The mutual insurance company, founded in 1952, was owned by policyholders, while the casualty company, founded in 1987, is privately held.

Billing Grace Period Ends in All But Three Counties

Some south Mississippians are returning to regular payment schedules to companies that offered billing grace periods to allow for hurricane recovery.

In response to a request from Insurance Commissioner George Dale, insurers suspended bank drafts, automatic electronic deductions from checking accounts, to give customers in affected counties time to assess their financial situations after Hurricane Katrina, Susan Lamey, a DOI spokesperson told the Hattiesburg American.

Bank drafts were reinstated and policyholders became responsible for back payments Nov. 1 in all but three devastated counties: Jackson, Harrison and Hancock.

State Farm notified policyholders via mail that back premiums were coming due, and at the insurance commissioner’s request extended the grace period for coastal counties an additional 30 days, Lamey said.

David McCullen, executive vice president of Community Bank said customers were confused about why insurance payments were not drafted. “They say, ‘My insurance didn’t draft and now I’ve got to pay three months of insurance. Why didn’t they just draft it when I had the money?'” he asked.

Even McCullen was in the same predicament, but advised insurance policyholders to follow his example if financially able. “I just had to write them a check to catch up on those couple months of payments, and get back on draft so I wouldn’t have to think about it again,” he said.

Jan. 1 Auto Rate Hike

Thousands of drivers in Mississippi will see their auto insurance rates increase dramatically after Jan. 1, when the minimum required coverage will double, increasing costs, even for those who have less than the minimum coverage.

Liability insurance coverage required to pay for damages to vehicles and other property in an accident will increase from $10,000 to $25,000; injury and death coverage will increase from $10,000 to $25,000 for one person, and from $20,000 to $50,000 for injury or death involving two or more people.

Earlier in 2005, the Mississippi Legislature increased the minimum coverage requirements when lawmakers agreed the old requirements were insufficient. At that time Mississippi had the lowest insurance minimum coverage requirement of any state, followed by Florida and Louisiana.

SOUTH CAROLINA

Companion Property Stops New Workers’ Comp Policies

The Companion Property and Casualty Insurance Group will stop issuing new workers’ compensation policies in South Carolina and won’t renew certain other accounts starting in January.

Companion, a Columbia-based subsidiary of BlueCross Blue Shield of South Carolina, said that a Dec. 1 moratorium on new policies “will remain in effect until we see adequate evidence that sufficient changes are in motion to help return the marketplace to profitability.”

The carrier also will not renew customers who limit their coverage to workers’ compensation only. Steven Bloss, Companion vice president, said that workers’ compensation customers will be able to extend their policies if they property, casualty or automobile insurance.

Companion met with many of the 60 agents statewide who offer its workers’ compensation policies to explain its decision. It will continue to provide workers’ compensation policies for customers who can’t obtain coverage elsewhere, under a “carrier of last resort” service contract with the state.

The company is hunkering down amid a lingering fight over a hefty rate request for workers’ compensation insurance that began in July when an industry-led group proposed an unprecedented 32.9 percent increase for South Carolina.

Insurers say they need higher rates because they are losing money on workers’ compensation. For every $1 paid in premiums in South Carolina in 2003, insurers paid out $1.27 in losses and expenses. Nationwide, that figure was $1.02.