This Florida insurance company has increased its rates by 36%. Will regulators approve it?

TALLAHASSEE – State regulators have taken a hard line on a property insurance company that wants to increase rates by 36% on average on more than 64,000 home insurance policies, the second increase significant rate of the company in one year.

During a hearing Friday morning, regulators questioned executives at Tallahassee-based Southern Fidelity Insurance Co., questioning the methodology, viability and reasons for wanting to raise rates for some homeowners of over 3,000. $.

“We made it clear that we were concerned about the rating methodology this company has used for years,” said Susanne Murphy, assistant commissioner of insurance for the Florida Office of Insurance Regulation.

Regulators made no decision on Friday whether or not to approve the increases. The company has over 8,200 policies in Dade, Broward and Palm Beach counties and over 11,100 in Hillsborough, Pinellas, Pasco and Hernando counties.

Southern Fidelity imposed the increases on July 1, less than a year after regulators approved its 31% rate hike.

For some clients who renewed their policies in July, that meant they absorbed both increases at the same time, seeing their premiums increase by more than 70% on average.

Related: Florida’s property insurance market is struggling. There is no miracle solution.

When asked why the company didn’t wait until August, so clients weren’t hit twice at the same time, the company’s actuarial director, Jesse Rehberg, said it was was the board’s decision.

“We felt it was imperative to get that rate,” Rehberg said.

If regulators don’t approve this year’s changes, the company will have to reimburse customers.

Regulators are in a difficult position with Southern Fidelity and other domestic real estate insurers, some of which are struggling to stay afloat. Many insurers have called for double-digit rate hikes, while others have been absorbed or gone out of business. Citizens Property Insurance, the state-run real estate insurer of last resort, has seen its policy count drop from 463,247 policies last year to 766,000 scheduled by the end of this year.

Related: Citizens Insurance Approves Even Bigger Rate Hikes For Florida Homeowners

Southern Fidelity has seen years of losses, and regulators have approved the cancellation of more than 47,000 unprofitable policies since May 2020.

Company executives have blamed the need for the large rate increases on higher litigation costs and the rising cost of reinsurance, which insurers buy to subsidize their own businesses.

But on Friday, regulators appeared skeptical of those reasons, instead focusing on the company’s methodology it used to come up with the proposed increases.

In one example, regulators noted that the company was basing the increases not only on its own data, but on analysis of data from other companies. And that external analysis was based on homes worth $ 300,000 built in 2021.

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Regulators wondered why Southern Fidelity wouldn’t rely more on its own data, or at least use external data that reflects their own volume of business.

“I don’t think what you have done here is a generally accepted actuarial technique”, said Kayne Smith, actuary in the Bureau of Insurance Regulation. “Surely, your book is not entirely made up of $ 300,000 of houses built in 2021.”

“This has been the standard process we’ve followed in all of our recent filings that I can remember,” said Klayton Southwood, a consulting actuary for the company.

Regulators said they had warned them for years against using this methodology.

Southern Fidelity also said on Friday it could ask for another rate hike in a month or two, which has left officials questioning whether the company’s practices are sustainable.

“I am very concerned about the future financial stability of this business,” said Tasha Carter, state insurance consumer lawyer.

Information from the News Service of Florida contributed to this report.

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Justin D. O'Neill