Court upholds State Farm's rate increase denial
By George LiMieux
Last year, State Farm announced plans to begin a two year withdraw from the Sunshine State due to declining resources to cover future claims. The announcement came after months of negotiations with the Office of Insurance Regulation over a requested 47.1 percent average rate increase.
Under current law, the Office of Insurance Regulation (OIR) reviews proposed insurance rates and either approves or disapproves of the rate. An administrative law judge twice found that Florida’s largest private insurer failed to show the requested rate increase was not excessive, inadequate or unfairly discriminatory. Last week, the 1st District Court of Appeal affirmed these rulings and the order from Insurance Commissioner Kevin McCarty denying the request for a rate increase was upheld.
This ruling comes on the heels of Governor Crist’s veto of insurance legislation, crafted in reaction to State Farm’s decision to withdraw from Florida.
Since the January 2007 Special Session, insurance rates have decreased an average of 15.9 percent statewide and enabled more than 400,000 policyholders to move from Citizens back to the private market. An average rate increase of 47 percent, as State Farm requested, is not in the best interest of Florida families. If lawmakers want to strengthen the private market, without breaking the backs and banks of Floridians, they should pass new legislation allowing private carriers to either pursue a rate increases before the OIR, or elect to receive a 10 percent increase per year for a fixed number of years, as Citizens will receive under recently enacted legislation. If a private company cannot make it work with 10 percent increases pen annum, good riddance.
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