State Farm raising La. homeowner insurance rates State Farm raising La. homeowner insurance rates Homeowners up an average of 8.7% BY TED GRIGGS| email@example.com Oct. 12, 2013 Comments State Farm is raising rates an average of 8.7 percent statewide for its nearly 308,000 homeowners policyholders. State Farm customers in East Baton Rouge Parish will see rates increase an average of 7.5 percent, according to the Louisiana Insurance Department. In Lafayette, rates will rise 9.4 percent. In Orleans and Jefferson parishes, rates will go up an average of 9 percent. The statewide increase will generate $40.1 million, according to State Farm’s filing with the Insurance Department. The higher rates are already in effect for new customers. Existing customers who are renewing their policies will see the increases starting Nov. 1. Rates also will increase for condo owners and renters. The increases vary statewide. In general, customers in coastal areas, where the risk of hurricane damage is greater, see higher rates. State Farm, the state’s largest insurer with 30 percent of the homeowners market, asked for a 16.6 percent increase in November 2012. Insurance Commissioner Jim Donelon rejected that request in January. Among other things, Donelon questioned the amount of profit built into the rates as well as the estimated cost of reinsurance, the insurance that insurance companies buy to protect themselves against excessive claims. In April, State Farm refiled. Donelon said State Farm’s analysis showed the company needed to increase rates by 24.4 percent, but the company asked for 15.2 percent. The Insurance Department found that only an 8.7 percent increase was actuarially justified, he said. Actuaries try to predict what policies will cost in the future, basing their calculations on a number of factors, including how old a house is; the type of construction; a company’s share of the market in the most hurricane-prone areas; the cost of reinsurance; and an insurer’s overhead, profit and salaries. Donelon said the department disagreed with State Farm’s calculations in a handful of areas, including the amount of profit built in; projected non-catastrophe losses; and the cost of reinsurance. In coastal parishes, about half the premium goes to cover hurricane and other catastrophic damages, Donelon said. The other half covers the risk from fire, burglary, dog bites and so on. State Farm had aggressively priced the non-catastrophic risk, he said. The department rejected that projection. State Farm also based its rates on a catastrophe model commonly used in the insurance and reinsurance industries, Donelon said. The Insurance Department now allows the model’s use — at one time it was embargoed — but requires the model to be used in conjunction with others in what Donelon called a blended approach. “With this latest increase, State Farm has now reached the average post-Katrina overall increase that the rest of the market … has taken,” Donelon said. State Farm didn’t ask for a rate increase until three years after Hurricane Katrina, he said. But over the past five years, State Farm has caught up. State Farm spokesman Gary Stephenson said he could not discuss the specifics of the rate filing. State Farm has paid billions in storm-related claims to tens of thousands of Louisiana customers over the past 10 years, and the company knows more storms will occur in the future, Stephenson said. The company has to achieve adequate rates to ensure its long-term strength and business viability, he said. The company was disappointed that it didn’t get the rates needed in the previous filing but will continue to work with the Insurance Department. Insurance Department records show State Farm has increased homeowner’s rates by an average of more than 36 percent since 2008.