Florida Gives Insurers Higher Rate Hikes Than They Requested
May 10--For South Florida homeowners, 2017 already figured to be a year of steep property insurance rate increases.
For customers of two insurance companies, state regulators have made those increases even steeper than the companies sought.
Why? State regulators say high costs stemming from excessive claims in the tricounty region requires the companies to charge customers more money than they would prefer.
The state "has an obligation to approve rates that are [financially] sound -- which may be more or less than what a company requests," said Sha'Ron James, the state's Insurance Consumer Advocate, who did not participate in the rate decisions.
Two companies -- Deerfield Beach-based People's Trust Insurance and Tampa-based Homeowners Choice Property & Casualty -- this week received approval for larger rate increases than they requested.
People's Trust, with 54,267 home- and condo-owner policies in the tricounty region and 129,365 statewide as of Dec. 31, sought a 14.5-percent statewide average rate hike and instead got a 16-percent hike.
Homeowners Choice, with 53,040 home- and condo-owner policies in the tricounty area and 130,041 statewide at the end of the year, sought a 3.3-percent statewide average increase and instead got an 8-percent hike.
"I'm not happy about this," Homeowners Choice CEO Paresh Patel said in an interview Tuesday. "I wish we didn't have to do it."
Because those are statewide average increases, South Florida customers can expect even higher rates. That's because most companies that do business here say tricounty customers on average submit more claims and report steeper losses. To address the higher risk, companies are allowed to charge more here.
In response to questions about the rate increases, a state Office of Insurance Regulation spokeswoman said the decision to approve higher rates than the companies sought was not connected to the failure, for a fifth-straight year, of legislation aimed at reducing claims abuses.
In the case of People's Trust, claims data submitted by the company showed the requested rate increases sought by the company weren't enough to cover losses experienced in Broward and Miami-Dade.
Regulators brought their concerns to the company and asked it to submit a business plan to address the shortcomings, the statement said, adding the revised rate was a result of the discussion and business plan submitted by the company.
In March, the company said it sustained heavy losses from claims abuses in South Florida, despite pioneering a unique business model in which the company offers discounted rates in exchange for customers' agreeing to allow the company to send its affiliated repair teams to handle claims.
Insurers say the region is home to disreputable contractors and attorneys who persuade homeowners to sign over claims benefits. Then they submit inflated water damage claims and file lawsuits so they can collect attorneys fees when insurers opt to settle.
Homeowners Choice CEO Paresh Patel said the higher increase was a recommendation from one of the state actuaries who reviewed the company's filing. The same actuary approved People's Trust's rate filing.
When insurers file rate requests, they are based on the companies' own analyses of loss trends and reflect what they conclude they need to cover costs and remain competitive in the marketplace, Patel said.
"[The state] has the obligation to ensure we don't charge a rate so high we are collecting excessive profits," Patel said. "They also have to ensure we don't charge a rate so low we are in danger of losing money or going insolvent."
Patel said that after the state analyzed his company's rate-hike request, the actuary contacted the company and said the requested 3.3-percent increase would not be adequate. Several phone calls later, Homeowners Choice agreed to the 8-percent increase, Patel said.
He said he understands the increases will cause pain for some. "A lot of people who didn't do AOB abuse or file any claims are going to be affected by this," he said.
Before this year's session, state Insurance Commissioner David Altmaier helped write a Senate bill that would have barred attorneys from collecting legal fees from insurers if representing repair contractors working under a claim assignment.
Had the legislation moved forward, Patel said, the company might have had a shot at convincing the state to keep the rate increase at 3.3 percent, or it might have filed to lower the rate later.
Amy Rosen, chief marketing officer at People's Trust, didn't directly comment on the state's approval of higher-than-requested rates.
"We wish that we didn't have to increase anyone's rates at all, but industry-wide water losses, as well as our own, in the tricounty area have necessitated this increase," Rosen said in an email.
Public hearings aren't required if the state compels a company to accept a rate increase higher than an insurer requests, the state spokeswoman said.
James, who called for a public hearing into a 14.9-percent rate hike request filed last year, and then withdrawn, by Heritage, said the state Office of Insurance Regulation should have called a public hearing over People's Trust's 14.5 percent request.
State law authorizes regulators to call a public hearing over rate increase proposals.
"During a time when rate increases are at an all-time high, I believe consumers deserve the highest level of transparency and accountability from their insurance company," James said in an email.
The "Assignment of Benefits" crisis has been cited as justification for rate increase requests by numerous companies since early 2016. Most notably, state-run Citizens Property Insurance Corp. blamed AOB abuses for seeking 2017 rate hikes between 8.9 percent and 10 percent in the tricounty region.
Heritage Property & Casualty received approval for a 9.9-percent statewide average hike last year that included 15-percent hikes for most South Florida customers.
Tower Hill Prime sought a 9.2-percent statewide hike in December. The state approved 8.8 percent.
Several other insurers, meanwhile, have submitted rate-increase requests of their own over the past two months: United Property & Casualty [8.5 percent], Federated National [6.4 percent], Castle Key Insurance [10 percent], Security First [11.4-percent].
A number of other insurers are seeking lower rate increases as well. Whether the state accepts those increases or seeks higher increases remains to be seen.
[email protected], 954-356-4071, twitter: twitter.com/ron_hurtibise
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