– Florida Insurance Commissioner Kevin McCarty today announced that the Office of Insurance Regulation (Office) has rejected State Farm Florida’s (State Farm) petition
for a formal hearing on the Office’s Aug. 25 Notice of Intent
to disapprove (Notice) the company’s 47.1 percent proposed statewide average increase. A letter
was sent to the company today.
In making its petition, State Farm was required by law, Section 120.569(2)(c), Florida Statutes, to set forth all disputed issues of material fact and cite specific statutes or rules it believes supported its petition for reversal or modification of the Office’s Notice. On the other hand, the Office is empowered by the same statute to reject the petition if it believes the company has not properly specified any disputed material facts.
“State Farm’s petition for hearing was incomplete,” said Office General Counsel Steve Parton. “In our opinion, they did not demonstrate that there were any material issues of fact in dispute. They basically just said that they disagree with the reasons we gave in the Notice.”
State Farm now has until Sept. 15 to amend its petition and resubmit it to the Office. If State Farm fails to file a sufficient petition within the 10 days, it will not be entitled to a hearing. The company also could withdraw its rate filing and make a new filing that is appropriately supported in compliance with Florida law.
The company’s 9 percent rate reduction that became effective in accordance with the Oct. 1, 2007 agreement
remains in effect. With its March 2007 filing, State Farm initially planned to reduce its rates by 7 percent but agreed to reduce them by an additional 2 percent. State Farm received a 52.8 percent overall average increase in late 2006.
Among the key reasons cited by the Office in the Aug. 25 Notice were: 1) The Company failed to demonstrate that the net reinsurance costs included in the filing did not result in excessive costs in violation of the rating law (Section 627.062, F.S.); and 2) The Office also questioned the profit and contingency factor and the additional retained hurricane risk load used in the filing. The retained hurricane risk load was previously allowed by law, but that provision was repealed in Senate Bill 2860. Eighteen other reasons were cited by the Office.
State Farm still cannot implement the proposed rate increases, because Senate Bill 2860 also prohibits companies from implementing rate increases through the "use and file" process, through Dec. 31, 2009.