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Insurers Vary On Rate Requests

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By RUSSELL RAY, The Tampa Tribune

Published: October 3, 2007

TAMPA - Almost half of all Florida property insurers are seeking rate increases for next year, a review of final rate requests filed with state regulators shows.

Some insurers are proposing significant rate reductions for 2008, but others are seeking double-digit rate increases that, if approved, could result in soaring premiums for customers.

Of 157 companies selling homeowners insurance in Florida, 75 have asked to raise premiums in their final rate requests. About 65 companies are seeking lower rates. The remaining 17 sought no change in rates.
State regulators said they could not comment on the overall property insurance picture for 2008 yet because they have not had time to review all new rate proposals.

The wide range of proposals may best be demonstrated by the state's two largest private insurers - State Farm and Allstate Floridian, a subsidiary of Allstate.

State Farm, Florida's second largest private insurer, said Tuesday it struck a deal with Florida regulators to lower premiums 9 percent, on average, statewide.

Allstate, the state's third largest private insurer, however, is seeking a 42 percent increase in premiums. If approved, the rate increase would wipe out savings from a 14.2 percent rate reduction the company initiated this year.

Gary Landry, vice president of the Florida Insurance Council, said the reason for the wide range of rate adjustment proposals is that every company has a different risk level.

'Every company has its own book of business and has a different exposure,' Landry said. 'No one rate is going to suit every company.'

'Risk Continues To Increase'
Rate adjustments approved by the state for 2007 may also explain why insurers' 2008 rate proposals vary widely.

State Farm was allowed to levy a 53 percent rate increase in November. Allstate received approval to raise rates 8 percent in January. It had sought a 24 percent increase.

'We were inadequately priced,' Allstate spokesman Adam Shores said.

The 42 percent increase Allstate has requested is what the company needs to ensure it can pay claims should a major hurricane hit the state, Shores said.

'Risk continues to increase and the cost associated with that risk continues to increase,' Shores said.

Tom Zutell, a spokesman with the Office of Insurance Regulation, said Allstate's request does not appear to be in line with a state law passed in January that requires companies to pass on savings generated from a $12 billion expansion of the state Hurricane Catastrophe Fund. The expansion allowed companies to buy reinsurance from the fund at a cheaper rate than the private market.

State Farm said its 9 percent rate cut will be applied to policies as they come up for renewal once its request clears the Office of Insurance Regulation. The state has 90 days from the time a final rate request is filed to issue a ruling.

'This agreement shows we're committed to Florida and keeping our Florida customers,' said State Farm spokesman Justin Glover.

So far this year, the 10 largest property insurers in Florida, which represent 62 percent of the market, have lowered homeowner rates an average of 12.7 percent, Zutell said.

Some companies have asked the Office of Insurance Regulation for permission to raise rates in 2008 because they need to buy additional reinsurance - backup coverage for insurance companies.

'Some companies are buying higher levels of reinsurance than what is offered by the cat fund,' said Landry, of the insurance council, referring to the state catastrophe fund. 'The cat fund is limited.'

Companies Concerned About Credit

The purchase of additional reinsurance is being driven in part by the demands of rating agencies, Landry said. If insurers don't buy a certain amount of reinsurance, their credit rating could be downgraded.

'Some companies, depending on their level of exposure, find it necessary to buy higher levels of reinsurance,' Landry said. As a result, their cost of doing business is rising and they want to pass that cost on to policyholders.

But state regulators are concerned that companies seeking higher rates are not passing on to customers the savings they realized from buying cheaper reinsurance from the expanded cat fund.

Landry disagrees, saying companies are passing on the savings to customers but also buying additional reinsurance because they fear the catastrophe fund won't be big enough to cover the claims resulting from a catastrophic event. The fund would cover up to $36 billion in losses, Landry said.

'The thing to remember is that a hurricane like Andrew in 1992, if adjusted to today's dollars, would be a $50 billion storm,' he said.

Reporter Russell Ray can be reached at (813) 259-7870 or rray@tampatrib.com.

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