State Farm raising Md. rates

Homeowner policyholders to be charged 25.2% more

Biggest insurer in the market

July 13, 2002|By Kristine Henry | Kristine Henry,SUN STAFF

Maryland's 348,000 homeowners who have State Farm insurance policies will be hit with rate increases of more than 25 percent beginning in September, the company said yesterday. The company is one of many that are raising rates in the state this year.

State Farm Insurance Co., the largest homeowner insurer in the state with nearly a quarter of the market, said it needs the 25.2 percent boost because of increases in the number of claims and in the average payment per claim.

State Farm, which lost $5 billion last year, also was hit by stock market losses, further depleting funds available to make payments. Because of the loss, the company announced last month a temporary moratorium on new polices in Maryland and 21 other states for those who are not State Farm customers.

The average claim in Maryland rose 37 percent, from $2,336 in 1999 to $3,191 in 2000, said spokesman Ric Adams, who attribute the rise to more-expensive building materials and labor costs. More recent figures were not available.

He noted that the last premium increase was 7.8 percent two years ago.

"We have to be able to provide for claims for them [customers]," Adams said. "We have to be covered so if they have a loss, we're able to pay for it."

State Farm's existing policyholders will see the increases at the end of their current policies' terms, beginning in September. The increases will go into effect for future policies Monday. Renters' insurance is not affected.

State Farm's increases are the largest, but many other insurers are also raising rates in the state.

According to the Maryland Insurance Administration, rates at Travelers Property Casualty Corp. are going up 11.9 percent; Allstate Corp. raised rates 20 percent in January and will raise them an additional 10 percent in October; Nationwide Insurance's rates will go up 15.5 percent; and Erie Insurance Group's will go up 9.8 percent. United Services Automobile Association and Farmers Insurance are raising rates 20 percent.

Across the country, homeowners' rates are going up 8 percent to 10 percent, according to the Insurance Information Institute in New York.

The average annual premium for Maryland homeowners in 1999, the latest year for which figures are available, was $372, according to the National Association of Insurance Commissioners. Nationwide, the average was $487.

"We do have a large number of insurers competing in the marketplace ... and we think we have a very competitive market," said Bob Becker, associate commissioner for property and casualty insurance at the state insurance administration. "When a large [insurance company] files a substantial increase, as I consider this 25.2 percent, I hope and think we do have a number of carriers who could step in and perhaps relieve State Farm of some of their market share."

Maryland is a "file and use" state, meaning insurance companies must notify regulators of rate increases but can implement them without formal approval. If the state rejects the increases and the decision is upheld in an administrative hearing, the insurance company must reduce rates and repay the difference to customers.

The state has no forum by which it alerts the public of rate-increase requests, and there is no formal procedure for public comment, a spokeswoman for the administration said. State Farm said policyholders will be notified of the increases when their renewal notices are sent - 45 days before payment is due.

Over industry objection, the state recently passed legislation, effective this fall, that bars insurers from taking into account a person's credit history when calculating premiums. State Farm said that was not a factor in its premium increase.

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