Let’s give them the Chaney (without vaseline): State Farm files for a 45% rate hike on the coast

I’ll have in depth analysis in another post. Let’s begin with Anita Lee and her front page story in today’s Sun Herald where Mike Chaney the tap dancing politician is long on rhetoric as he prepares coastal policyholders for the shaft:

The focus at State Farm headquarters in Bloomington, Ill., is on the bottom line, not consumers, Mississippi Insurance Commissioner Mike Chaney said after receiving the insurance company’s request for an average 45 percent rate increase on existing business on the Coast.

“The more I’m around these folks, the more I worry about them,” Chaney said Friday. “They don’t have a heart. The corporation as a body has no compassion for the consumer.”

Coast agents were notified of the rate increase request on Friday, when it was filed. The proposed increase would be 46.9 percent south of Interstate 10 and 43.5 percent on the north side.

“While we understand the impact this request may have on some policyholders,” the memo said, “We also recognize our responsibility is to our entire policyholder base. This rate change will provide us the ability to more appropriately balance the risk with ensuring our ability to continue to serve our policyholders along the Gulf Coast and throughout Mississippi.”

State Farm spokesman David Majors pointed out that the insurance commissioner and his department will be requesting more information as the rate filing is reviewed.

“We’re a long way from the results on this,” Majors said.

Chaney said the rate increase could actually be as high as 60 percent, depending on how it is structured in State Farm’s rate filing. Majors could offer no information to confirm or refute that percentage.

Chaney said MID will not grant the full rate increase request.

State Farm’s rate proposal also includes an increased discount for homeowner policies without wind. The discount would go from 80 to 85 percent in the upper three South Mississippi counties and from 70 to 75 percent on the Coast.

MID plans to hold public hearings on the Coast about the proposed rate increase in two to three months, after it has been reviewed by actuaries, professionals who calculate risk. Rate hearings have historically been held in Jackson, but Chaney says he will to bring them to the Coast because the increase is proposed here.

The commissioner said State Farm executives would not include with the rate filing a plan to write new business on the Coast. State Farm stopped writing new business after Hurricane Katrina and also discontinued policy renewals on properties near the Mississippi Sound or waterways that spill into it.

“The problem we run into as regulators is, we say, ‘Well, are you going to open up the Coast and start to write new business?’ They say, ‘No.’ ” Chaney said.

State Farm was previously granted a 6- to 18-percent rate increase in 2008 for Coast homeowner policies that included wind. The company also moved at that time to a mandatory 5 percent hurricane deductible.

The nation’s largest property insurer decided to stop writing policies in Florida after state regulators refused to approve an average 47.1 percent rate hike the company requested. State Farm said the hike was needed to offset a significant increase in mandatory credits given to homeowners who build stronger.

6 thoughts on “Let’s give them the Chaney (without vaseline): State Farm files for a 45% rate hike on the coast”

  1. Nowdy I’ve gone therough the filing once and I think it is incomplete for information, at least compared to what was filed in Florida. I’m going to send the doc out to some experts and see what they say. State Farm does mention they are subject to $3 billion of cat risk nationwide but neglected to mention the disaster that is Merna Re which was supposed to provide reinsurance for $4billion dollars of combined US perils except that it was stuffed full of toxic paper.

    I have not seen the Farm’s 2008 financials, it is entirely possible they are technically insolvent if they took the type of plunge into CMBS and RMBS that their special purpose entity Merna Re did with those Cat Bonds.

    In the filing they mentioned they are retaining 65% of the premium into capital which is very meaningful due to it’s excessiveness. Windpool rates could go down drastically in just a few years if Chaney allowed them to do the same.

    sop

  2. That strikes me as a good idea, Sop.

    I’m convinced the devil is in reinsurance – and that these insurers that also provide reinsurance can raise rates and lose customers but still make money.

    In the proposal, State Farm offers lower rates for policies without wind coverage…

    Great idea!…Stick it to the windpool…make money from windpool reinsurance…use your clout to get the legislature to make the windpool a private entity with no transparency.

    Then you look at Florida and you see the next wave is backing out on lower rates for property that has been made more hurricane resistant (mitigation).

    and, for what it’s worth, the effort to discredit Congressman Taylor is the only thing about insurance that’s transparent – and like the wind itself, it sucks. IMHO

  3. I wonder if anyone at MID has kept up with State Farm’s great adventure in toxic paper? If you remember we could only find where $1BN of those Merna Re Cat Bonds were sold and those were stuffed into retail channels not normally known for buying such exotic investments.

    The pattern here of the SF operating companies pouring money back into Bloomington (as noted by the Flroida adminsitrative law judge calling such transactions termed as reinsurance a “sham”) indictates to me the parent company is starved for capital.

    The difference between McCarty in Florida and Chaney here in Mississippi is McCarty refuses to allow State Farm to run him and his department over. Mr Chaney was on WLOX last night tap dancing and backtracking from some of his coments made to Anita Lee and is now saying he has some ammo to negotiate with them. If he truly believes in free markets likes he says he’d follow McCarty’s lead and tell the Farm hell no and leave if they don’t like it.

    State Farm obviously doesn’t believe as much in competition and free markets as they have since gone after several of the smaller insurers in Flroida who were poised to step up and take the business there.

    Chaney has a chance to change the editorial perceptions of this author though I expect him to go the tap dance route and cut a backroom deal that once again sells out the people here on the coast. I truly hope he proves me wrong.

    sop

  4. Are you saying Chaney is looking for the talking points which will result in the least blow back to himself and State Farm? Lets face it State Farm is trying to pressure Congress to give it a new government program to help it boost profits. Its called the federal backstop program for reinsurance. State Farm has been trying to get this program passed for over 10 years and we are his pawn.

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