State Farm Seeks Homeowners Rate Increase in Florida
State Farm Insurance Co. is seeking to boost premiums by an average of about 70 percent in Florida, the company said Friday.
If approved by state regulators, the increase would be effective Aug. 15.
The Bloomington, Ill.-based company, which covers about one in five Florida homeowners, said the premium increase is largely due to higher reinsurance costs. Reinsurance is coverage for insurance companies, bought to back up the company should it have massive claims.
Home insurers have been requesting large rate increases and in some cases not renewing policies in Florida. Two years of heavy claims from hurricanes and fears of a more active period have led to a spike in the cost of reinsurance.
State Farm, which has just over 1 million Florida homeowner’s policies, says it is trying hard to remain in the state.
“I’m not going to say there’s any good news in this, those increases will have big impacts on our customers,” State Farm spokesman Chris Neal said. “But if there is a silver lining, it is that we can continue to do business in Florida.”
Also, about 30,000 mobile home owners will see their rates nearly double if State Farm is granted a request for an average 95.3 percent increase on mobile home policies.
“We’ve certainly learned the last two seasons that manufactured houses are far more likely to be destroyed or badly damaged in a hurricane,” Neal said.
In addition to increases of more than 70 percent for the average homeowner, State Farm also announced it is canceling about 1,500 policies held by condominium complexes. Those policies cover the roof and other common parts of condo buildings, not individual units. Condo owners typically have individual policies for their unit.
Meanwhile, another large insurer, Allstate Corp., has potentially good news for many of its customers. Northbrook, Ill.-based Allstate is seeking to reduce its exposure in Florida, but it has found a new company to take over about 120,000 policies.
With Ormond Beach-based Royal Palm Insurance agreeing to take over those policies, those customers won’t have to go into state-run Citizens Property Insurance Corp., which is required by law to charge the highest rates in the state.
Customers shouldn’t notice a huge change under the plan, said Allstate spokesman Bill Mellander. Allstate agents will sell Royal Palm policies, and Allstate will process claims.
“Our intent is that it should be a seamless transition for those customers starting in November,” Mellander said.
Allstate currently has about 686,000 homeowners policies in Florida. With the move, it will reduce that number to about 506,000.
Allstate has found itself overexposed in some areas, facing the prospect that a hurricane hitting areas where it has saturated the market could cause too big of a financial hit.
Royal Palm is able to assume some of that risk because it can avoid overexposure in any one place.
“We can pick the policies that we want,” Locke Burt, a former state senator who heads Royal Palm, said. “One of the keys to success is spreading your business around the state. The mistake a lot of companies have made has been to be over-concentrated in one geographical area.”
It’s not clear yet exactly what impact transferring the policies from Allstate to Royal Palm will have on rates.
“The rates they get from Royal Palm should be competitive,” Mellander said. “Are they likely to be identical? No. But it’s going to be comparable to what they see.”
Allstate also announced Friday that it will no longer write policies for mobile homes. The company has about four percent of the mobile home market in Florida. It will also stop writing residential fire policies in Florida.
State Farm also said Friday that it will drop wind coverage for about 39,000 customers in certain coastal parts of the state. Neal said State Farm will continue to cover other damages for those customers, but coverage for wind damage will shift to Citizens.