Asked to Rethink 41% Rate Increase, Florida Farm Bureau Did. New Request is Higher

When Florida Farm Bureau Insurance companies filed for a 41% rate increase for homeowners last December, the Florida Office of Insurance Regulation asked company actuaries to sharpen their pencils, review all data and try again.

The insurer’s vice president said Tuesday that the company did just that – and ended up with an even larger average rate request of 48.7%.

“We went back to the drawing board. We submitted a new version of the indications” and even threw in another quarter of loss data, Florida Farm Bureau’s Ben Kimmons said at an OIR rate hearing Tuesday afternoon.

The result of the re-review was that loss costs and loss development factors have only grown since 2021, thanks to an increase in the frequency and severity of wind claims, the growing impact of inflation on building material costs, a reinsurance price hike and litigation expenses. It’s the latest indicator of the challenges that property insurers are facing in the troubled Florida market.

Kimmons was asked about the nature of the non-hurricane wind claims: “I categorize the losses mainly as roof claims,” he said at the hearing. “Many more roof claims with much higher costs.”

His words echoed what several other insurers have said over the past two years about potentially exaggerated or even fraudulent claims about roofs that may have little more than age-related wear and tear. Farm Bureau has been harder hit than some, less than other insurers. It has felt net losses for seven straight quarters from 2019 through most of 2021. The company also saw a downgrade in its financial strength rating in March of this year.

To deal with the losses, Florida Farm Bureau, a subsidiary of Mississippi-based Southern Farm Bureau, has taken a number of steps. In February, company officials announced an end to new business in Florida, at least until its rates rise sufficiently. The carrier also has said it will not renew policies for homes with shingle roofs 20 years old or older.

Farm Bureau also has instituted an alternative-dispute resolution to help keep claims disputes out of litigation. But company President Steven Murray said that alternative resolutions appear to trigger an increase in the dollar amount of claims. The carrier also is in the midst of launching a contractor network, asking policyholders to use only those restoration companies approved by the insurer.

Murray noted that Farm Bureau has been subjected to far fewer assignment of benefits claims than have some insurers: Less than 4% of claims from Hurricane Michael in 2018 were from AOBs, far below the state average for the largest property insurers. He attributed that to rapid response from the company’s agents and adjusters who have aimed to reach homeowners quickly after storms – before public adjusters or contractors could swoop in with AOB forms.

If the 48.7% average rate increase is approved, the average spike in premium for Florida Farm Bureau’s HO-3 renewing policies would be about $1,200 annually. Florida Farm Bureau General Insurance Co. and Florida Farm Bureau Casualty Co. together reported 80,380 policies in force in Florida at the end of 2021.

“The day we get our rates adequate, we would like to start writing new business,” Kimmons said.

The OIR held two other rate hearings Tuesday. Kin Interinsurance Network had requested a 25.1% increase in homeowners multi-peril rates and First Floridian Auto and Home Insurance Co. asked for a 22.9% increase.

At the First Floridian hearing, company Vice President Bob Aaron noted that his company has considered offering policies that would prohibit the use of assignment-of-benefits agreements.

“But based on the trends we’re seeing in the industry, I don’t feel it would be effective,” Aaron said.

After the passage of legislation in 2019 that sought to limit AOBs, contractors and attorneys have found other ways to directly access insurance benefits in claims, he noted.

Tampa-based First Floridian, a unit of The Travelers Indemnity Co., had 12,750 policies in force in Florida at the end of 2021, the OIR has reported. The OIR officials did not say when they might make a decision on the rate requests.