A two-judge panel has rejected a petition by Texas's Office of Public Insurance Council to roll back a State Farm Lloyds rate hike.
The insurer raised rates by 20 percent for new policies and renewals in late 2012, which would collect an additional $317 million in annual premiums from 1.2 million homeowners' policyholders in Texas, a file-and-use state. State Farm, the largest property insurer in Texas, maintains that the rate hikes were needed to cover recent weather-related losses.
Public Insurance Counsel Deeia Beck scrutinized the increase, calling it “excessive” and actuarially unsound.
“State Farm Lloyds proposed rate changes across policyholders are unfairly discriminatory because they do not bear a reasonable relationship to the expected loss and expense experience among the risks and are not adequately supported,” she stated in a petition from the Office of the Public Insurance Counsel.
The judges reviewing the case, Hunter Burkhalter and Henry Card, rejected the challenge in a written ruling, saying that “State Farm Lloyd's rates are not excessive, unreasonable or unfairly discriminatory within the meaning of the Texas insurance Code.”
The judges are forwarding their recommendations to Texas Insurance Commissioner Julia Rathgeber, who will review the findings before deciding whether to permit the insurer to continue charging its current premiums.
“Setting adequate rates in Texas enables us to keep our promises to our customers when they need us the most,” says State Farm spokeswoman Patti Kelley. “The state's insurance regulator rightfully let our rates go into effect, and now the administrative law judges agree our rates were justified.”
According to the Texas Department of Insurance (TDI), State Farm posted a 47.5 percent loss ratio in 2012, compared to the statewide average of 54.4 percent. In 2012, the earned written premium for State Farm's homeowner insurance companies, including State Farm Lloyds, increased by 1.5 percent to $18.3 billion. Underwriting loss was $0.3 billion.
In the past, TDI alleged that State Farm Lloyds overcharged customers for homeowners' policies purchased between 2003 and 2008.
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