Florida has not had a hurricane in six years, since Hurricane Wilma hit in October 2005.  No hurricanes mean no property losses from “wind damage” and thus no claims that require payments to homeowners.

Then why does State Farm Insurance Co. need a “statewide average increase” of 14.9 percent? The simple and sad answer is “because they can.” State Farm also wants to raise rates 49 percent on apartment and other renters, and an average of 27 percent on condo owners.

If approved, these huge increases would be effective Sept. 1 for new policies, and Oct. 15 for renewal policies.  Keep in mind the current pending increases are in addition to approved increases for State Farm of 52 percent in 2006; 28 percent in 2009; and 20 percent in 2011.  Even health insurance doesn’t usually go up that fast, that often!

State Farm is the second largest private insurer in Florida with 467,000 policyholders and almost 8 percent market share.  State Farm and other large insurance companies have reduced their “hurricane wind exposure” and even threatened to leave the state.  Of course, this is a bluff to get increased premiums and shed more risk in coastal communities.  State Farm won’t leave Florida because it makes millions on property insurance and even more on lucrative auto insurance. Plus, we are told State Farm is “like a good neighbor.”

It shouldn’t surprise anyone that State Farm is asking for only a 14.9 percent average increase.  Why?  Because a full public hearing by the Office of Insurance Regulation is required only for increases of 15 percent or more.  Accordingly, the Office of Insurance Regulation held a public hearing in Tallahassee on July 25th, but only on the proposed 49 percent increase for renters.  The jack up in homeowners’ rates goes into effect without any meaningful regulatory oversight.  Only nine people attended the “public hearing” – wouldn’t it be prudent to hold 3 or 4 public hearings around the state at courthouses or colleges to allow the people affected by this change to voice their comments? 

In addition to these rate increases, State Farm and all residential property insurance companies can also get an additional 15 percent rate increase for “reinsurance” with an underwriting profit.  Since Senate Bill 408, effective in summer 2011, the 15 percent “reinsurance” premium increase is virtually guaranteed even if the insurance company is buying it from an affiliated company they own or control.  State Farm, for example, invested $200 million in DaVinci Reinsurance Ltd., an offshore Bermuda company.  DaVinci premiums and profits are unregulated by Florida and it pays no U.S. taxes.

Besides charging higher rates, the playing field is already heavily tilted in favor of insurance companies in many ways.  The passage of SB 408 allows companies to:

• Hold back full claims payments and require homeowners to advance money for dwelling repairs, even when they have purchased “replacement cost coverage” for an increased 25 percent premium;

• Stop paying windstorm and hurricane claims after three years, even when there is latent mold or water damage, or structural damage that does not appear until after the deadline; and

• Restrict sinkhole coverage and impose unfair and costly bureaucratic hurdles to get these claims paid.

So what should homeowners and renters do?  Return full rate regulation back to the Office of Insurance Regulation so there will be public hearings for all rate filing increase above 10 percent; ask for additional public hearings regarding the renters insurance and all other insurance rate increases; and tell the Office of Insurance Regulation to “Just Say No” to State Farm’s unreasonable price hikes!

Gary M. Farmer, Jr., founding senior partner of Farmer, Jaffe, Weissing, Edwards, Fistos and Lehrman, P.L. in Fort Lauderdale, is President of the Florida Justice Association.