February 10, 2010
Commissioner Jim Donelon announced today his decision to decline
a recent rate request filed by State Farm
Fire and Casualty
Company “State Farm”. State Farm filed the +19.1%
rate revision to their homeowners program in December of 2009.
was under department review until now.
The filed rate revision would have provided an estimated $67,625,043.00
in additional premiums to the company. The filed rate revision would
equal an average statewide increase of 19.1%, but would have varied
in different areas of the state from a low of -5.0% to a high of
Donelon says that after an extensive review of the filing and consideration
of multiple factors including data provided
by State Farm, the rate revision was determined to be unreasonable.
Determining factors include use of an excessive loss trend by State
Farm, as well as an unreasonable hurricane risk provision. Also of
concern is the significant weight given the latest version of the
EQECAT hurricane model used by State Farm in justifying their revision.
The EQECAT model’s projected hurricane loss provisions are
150% higher than projected hurricane loss provisions produced by
the two other industry hurricane models utilized by State Farm in
this filing, without adequate supporting evidence for the difference.
Donelon said, “When
a rate revision is filed, we use all evidence available to make
the determination as to whether
the revision is reasonable and justified. In this case, State Farm
Fire and Casualty falls short of proving the need for an increase
of this magnitude.”
In 2008 State Farm Fire and Casualty Company had a market share
of 27% of all Louisiana homeowners policies and is the largest homeowners
policy provider in the state. Questions regarding the declination
of the rate request can be directed to the Louisiana Department of
Insurance Public Affairs Office at (225) 342-4950.