Headlines

The Florida Office of Insurance Regulation stood toe to toe with State Farm Florida and won a significant victory for both the company’s clients and indeed all of the state’s property insurance consumers.

Against a company threat to exit Florida’s property insurance market entirely, and thus dump more than 810,000 residential policies, regulators held firm against the insurance giant’s demand for a 47 percent rate increase.

Since State Farm clearly failed to justify such a huge jump, state officials negotiated an agreement for an average 14.8 percent hike in premiums.

While that will be small solace to State Farm property insurance customers, including the 10,000 in Manatee County, the alternative could have been worse. Those homeowners would have been either shopping for another company, or been left with state-run Citizens Property Insurance.

Citizens already stands on shaky ground with rates that are not actuarially sound, and that opens up the prospect that severe hurricane damage could bankrupt it and leave every Floridian property insurance policyholder on the hook for losses.

State law allows Citizens to charge all insured residents under that scenario. Citizens’ exposure is enormous already, with more than 1 million policies, and its rates are also rising.

The state has also approved a batch of property insurance rate increases for other carriers.

The state is much better off with private companies handling the risk.

State Farm’s pending 14.8 percent hike will put the company in stronger financial shape.

In announcing the agreement, Florida Insurance Commissioner Kevin McCarty noted that increase was justified based on hurricane risk models and higher costs for reinsurance.

The deal also allows the insurer to drop 125,000 policies between August 2010 and August 2011, and the first group of homeowners will be notified in February so they’ll have six months before the next hurricane season begins to find coverage elsewhere.

“A smaller, leaner State Farm is Florida is better than no State Farm at all,” McCarty stated.

We agree.

The state should not be in the business of strangling private enterprise with over-regulation, yet must protect consumers from gouging at the same time. That’s a delicate balancing act, one regulators walked well with this agreement. The deal lends greater stability to the insurance industry, and that’s an imperative in a hurricane-prone state.