State Farm seeks to raise homeowners' rates

TALLAHASSEE — State Farm, Florida’s largest private home insurer, is asking for a 47.1 percent rate hike, arguing that it has lost more than $1.2 billion in the last 10 years despite profits the last two years.

State Farm also says it will operate at a loss next year — even if no hurricanes hit Florida — unless it gets the rate hike.

“We must stabilize State Farm Florida’s financial condition,” spokesman Michael Grimes said.

The 47.1 percent is a statewide average. In Palm Beach County, State Farm customers would see rates increase between 27.7 percent and 68.9 percent. Homes east of the Intracoastal Waterway would be at the high end of that spectrum.

The state Office of Insurance Regulation will hold a public hearing on the rate request in August.

In a letter to OIR, State Farm said it has turned profits of $134 million and $108 million in 2006 and 2007 respectively. However, since 1988, State Farm says it has lost $6.2 billion, including $1.2 billion in the last 10 years.

“At present rate levels, the company soon will not have the financial capital to support the risks it has underwritten,” the letter says. “Rates will need to rise and/or risk will need to further decrease in order to operate the company in a responsible manner.”

State Farm did get a 52 percent rate hike in 2006; however, it says the revenue from the increase never materialized, and it cites the state-mandated windstorm mitigation discount program as the reason. The program gives homeowners discounts on their homeowner’s insurance premiums for various construction features, such as stronger roofs.

State Farm anticipated about 45,000 of its customers taking advantage of the program and getting discounts. However, more than 250,000 customers have enjoyed savings from the program, and that number climbs every month.

In some cases, the discounts are so generous that they exceed 90 percent of the hurricane portion of the premium.

"These developments have triggered a significant decrease in State Farm Florida's projected revenue for 2008, 2009 and beyond," State Farm said in another document.