News & Updates


State Farm makes case in rate hike hearing


Palm Beach Post Capital Bureau

Monday, October 27, 2008

TALLAHASSEE — State Farm, the state’s largest private insurer, Monday defended a sought-after 47.1 percent hike to homeowners insurance policies at a hearing expected to last up to a week.

In August, state insurance regulators rejected the rate hike, which would have driven up homeowners policies in parts of Palm Beach County by nearly 70 percent.

In turning down the request, Florida’s Office of Insurance Regulation, which oversees rate hikes, cited technical deficiencies, a lack of evidence that the boost was justified and questions about losses; specifically, losses the insurer claimed it incurred because the legislature forced a rate reduction for homeowners who harden their homes against storms.

State Farm took its case to an administrative law judge, asking him to recommend granting the hike.

Lawyers for the State Farm assured Judge Daniel Manry on Monday that their proposal is sound and necessary to keep the insurer solvent enough to pay claims in the event of a catastrophic storm.

The state subsidiary of the company, which received an average 52 percent rate hike in 2006, really needs a 67.6 percent rate increase now, argued State Farm Vice President Kathy Popejoy, an actuary. In her 25-minute opening statement, State Farm attorney Cynthia Tunnicliff said, "You will hear no testimony that the actuarial judgments that went into projecting the expenses was not reasonable. You will hear no testimony that the actuarial judgments that went into the rate of return was not reasonable. You will hear no testimony that the proposed rates are excessive or unfairly determined."

The Office of Insurance Regulation’s opening statement from attorney Marc Herskovitz was brief: "We disagree with most if not all of what was said and the balance we’ll reserve for the testimony."

The company has had some success in winning rate hikes in Florida from regulators. In 2006, State Farm won approval to raise its rates an average of 52.7 percent statewide and more than 100 percent in parts of Palm Beach County.

The hearing on the current rate hike request is scheduled to last a week. Manry then has 30 days to issue a recommended order, after which state regulators will have 45 days to make a final order.