Don’t sacrifice homeowners
Regulators shouldn’t give State Farm carte blanche to keep it in Florida.
Earlier this year, regulators made State Farm pay policyholders more than $100 million in credits and refunds because it failed to honor state rules requiring the company to tell customers about discounts they can get for hardening their homes against storms.
State Farm said it needed to impose a 47-percent rate increase on homeowners, only regulators and an administrative law judge found the request actuarially unsound and insupportable.
Then, because it couldn’t get its 47 percent, State Farm said it would pack its bags, shed its remaining homeowner policies (it previously had cut loose thousands of loyal customers it considered too high-risk) and leave Florida.
But now the company’s slowing its packing because…it’s negotiating with Florida about possibly staying!
Hey, if State Farm wants to stay — something we thought it planned to do all along if it managed to wrest some concessions from the state — let it.
So long as state regulators continue to reject excessive rate hikes. And so long as they keep working to make State Farm a better neighbor.
Times actually have changed since State Farm’s 47-percent plea in January, making certain rate-hike requests for insurers more palatable. For example, the cost to underwriters of acquiring backup insurance they need to pay claims after catastrophic storms has increased. Like other industries and individuals weathering the recession, many insurers also are getting a lesser return on their market investments.
Insurers like State Farm also are now having to provide millions of dollars in discounts to policyholders who install hurricane-tough shutters and roofs.
But it’s hardly time to hand the insurers everything they want. Today ends the fourth consecutive hurricane season without a blow striking Florida, allowing insurers to considerably grow their assets. Moreover, left to their own devices, many insurers and their pals in the Legislature would work to scrub all regulations. Lawmakers tried that last spring, passing a bill that would have stripped state regulators of their authority to deny rate hikes they deemed excessive. To his credit, and the benefit of consumers, Gov. Crist vetoed it.
Insurers justifiably claim they’re paying out millions to customers taking advantage of the state’s requirements that insurers discount policies for residents who harden their homes.
There appears evidence that the state’s Citizens Property Insurance Corp. paid out millions for improvements that didn’t happen. Citizens rightly is looking to put an end to that, though it wrongly awarded a contract to an inspection company without requesting bids from others. It should rectify that.
Private insurers, too, are now rushing to corroborate reported home improvements. Fraud should drop.
Nevertheless, the insurers should be more than able to discount any bona-fide improvements. After all, tougher homes will better withstand storms, saving insurers millions in claims.
There’s nothing regulators can do to keep an insurer like State Farm from eliminating voluntary discounts it offers customers for, say, not filing claims over several years. The company said it’s scrapping them.
But they can enforce the discounts the state requires, and police rate-hike requests. If that ends up being too much for State Farm to swallow, so be it.