Two pieces of news provide a flicker of hope amid the doom and gloom.
State Farm Fire and Casualty Co. is raising rates on more than 600,000 homeowners policies in Tennessee and Kansas in the independent homeowners program, which will result in a $32 million premium change, according to state filings.
Policyholders in Tennessee affected by the rate action will see an average increase of 6.3%, according to the filing. The increase will bring in an additional $20.7 million from 413,321 policies.
Policyholders affected in Kansas will see an average increase of 6.4%, which will bring in $11.3 million from 190,939 policies.
In both states, the change was effective for new business on March 1, while the effective date for renewal business is April 15, according to information from Best's State Rate Filings (http://ratefilings.ambest.com). The changes will affect 604,290 policyholders between the two states.
Some policyholders in Kansas could see rates rise as much as 30%, according to the filing. That will be limited to some condominium owners, which is estimated to be less than 5% of policyholders affected by the rate change.
Kip Diggs, spokesman for State Farm in Tennessee, said the company needed to raise the rates to ensure it can pay future claims. State Farm noted in the filings the company does not rely solely on rate increases to meet financial objectives. The company said it also tries to improve internal expense controls, participates in loss prevention and makes investments.
"The changes detailed ... reflect our best efforts to recognize our actuarially suggested income needs and have premiums that are as competitive as possible," the company wrote in the filing.
As the company noted in its Tennessee filing, State Farm Fire and Casualty has been underwriting at a loss over the past several years. In the past five years, the only profitable underwriting year was 2007 and it lost varying amounts in the other years reaching its highest loss in 2008 of $2.9 billion, according to BestLink. The company has posted a positive net income in two out of the past five years. The biggest net loss was in 2011 when it had a net loss of $1.4 billion, and its biggest gain was in 2007 when it had net income of $956 million.
Underwriting was adversely impacted by losses from the remnants of Hurricanes Gustav and Ike in 2008, more frequent and severe wind, tornado and hail storms across the United States and competitive market pricing, according to BestLink.
The top five writers of homeowners insurance in 2010 in Tennessee, according to BestLink, were: State Farm Group, with market share of 27.1%; Tennessee Farmers Insurance Cos., with 19.1%; Allstate Insurance Group, with 9.8%; Travelers Group, with 6.2%; and Liberty Mutual Insurance Cos., with 5%.
The top five writers of homeowners insurance in 2010 in Kansas were: State Farm Group, with market share of 24.2%; American Family Insurance Group, with 14.3%; Farmers Insurance Group, with 10.7%; Farm Bureau Property/Casualty Group, with 8.8%; and Travelers Group, with 5.5%.
State Farm Fire and Casualty currently has a Best's Financial Strength Rating of A+ (Superior).
(By Michael Buck, senior associate editor, BestWeek: Michael.Buck@ambest.com)