Court denies State Farm appeal for higher rates; insurer says no change to pullout plans
By JEFF OSTROWSKI
Palm Beach Post Staff Writer
Tuesday, July 21, 2009
Florida’s insurance commissioner was correct to reject State Farm’s request to raise property insurance rates by 47 percent, an appeals court has ruled.
Meanwhile, the state’s largest private insurer still plans to stop covering Florida homes, although it’s unclear when State Farm will begin dropping policies.
The 1st District Court of Appeal backed Insurance Commissioner Kevin McCarty’s order rejecting State Farm’s rate hike. The one-word ruling, issued Monday, simply read "affirmed" and did not explain the decision.
The ruling shed little light on the question nagging the 700,000 Florida policyholders that State Farm plans to drop in the near future: When will I get a non-renewal notice?
"There’s no clear timeline," said Ed Domansky, a spokesman for the state Office of Insurance Regulation.
That’s because State Farm and regulators are disputing details of the carrier’s proposal to pull out of the state over two years. An administrative hearing on State Farm’s withdrawal plan is scheduled for Oct. 12, but it could be months before State Farm sends its first non-renewal notice.
Citing losses and the risk of hurricanes, State Farm said it needed a big rate hike to continue doing business profitably in Florida. After McCarty rejected the 47 percent increase, the Bloomington, Ill.-based insurer said in January it would pull out of the property market in Florida, although it will continue to sell auto, life and health coverage.
"State Farm’s actions suggest that it intended to use the denial of the filing as a pretext for threatening to withdraw from the Florida property insurance market," McCarty said in a statement.
State Farm gave no indication that it has changed its plan to drop its Florida property policies.
"I don’t think (the ruling) has any effect one way or the other on our plans," State Farm spokesman Chris Neal said.
Some think State Farm doesn’t really want to leave. Bill Newton, executive director of the Florida Consumer Action Network, predicted State Farm will cut some employees and drop some policyholders but remain in the Florida property market.
"Finally, their bluff has been called, and we get to see their cards," Newton said.
Not everyone applauded the ruling. Christian Cámara, director of the Competitive Enterprise Institute’s Florida Insurance Project, said the state long has overregulated insurance rates.
"If consumers want to pay the rates that State Farm wants to charge, they should be permitted to do so," Cámara said. This practice of forcing insurers to set their rates through the political process is the root cause of the state’s insurance crisis."