State Farm can drop some discounts on homeowners policies
BY BEATRICE E. GARCIA
bgarcia@MiamiHerald.com
State regulators are allowing State Farm Florida Insurance to eliminate or reduce some of the discounts it offers policyholders, increasing premiums on homeowners policies.
However, State Farm can’t reduce the credits it offers homeowners for installing wind mitigation features such as storm shutters, impact-resistant windows and doors or reinforced garage doors to protect a home against violent weather.
Regulators disallowed the analysis State Farm provided in its filing last week to justify why the mitigation credits should be reduced. The Office of Insurance Regulation said in a letter to the insurer that the analysis must be done by the same computer modeling company that originally established the criteria for the mitigation credits.
State Farm had used another modeling firm’s work as the basis of its analysis.
The changes it can implement “should help slow the deterioration of State Farm’s financial condition,” said Justin Glover, a State Farm spokesman.
State Farm says the move is a last-ditch effort to remain solvent as it prepares to stop writing property insurance in Florida over the next two to three years. The insurer has said that because policy rates are so low, it can’t continue to operate in Florida and remain profitable. The company eventually would drop more than one million policies, including about 700,000 covering single-family homes in Florida.
Last year, the company complained that the mitigation credits — which were doubled in 2007 — were too steep and had drastically eroded its revenues in the past two years. State Farm had requested an average 47.1 percent rate hike last year to make up some of the revenue it lost via the credits. The rate filing was rejected.
State Farm can eliminate discounts for customers with more than one policy with the company, for installing burglar alarms and not having filed any previous homeowners claims.
Doing away with a discount for homeowners who have few claims could provide a big hit since it provided a significant decrease on policy premiums of 5 percent to 20 percent, Glover said. The company is allowed to reduce discounts it now provides for upgraded plumbing, electrical and A/C and heating systems.
State Farm had intended to implement the discount changes with renewals starting after Dec. 1. Policyholders will be notified of the changes about 100 days before their current policies expire.