Released: February 10, 2010

Insurance Commissioner Jim Donelon announced today his decision to decline a recent rate request filed by State Farm Fire and Casualty Company “State Farm”. State Farm filed the +19.1% rate revision to their homeowners program in December of 2009. The filing was under department review until now.

The filed rate revision would have provided an estimated $67,625,043.00 in additional premiums to the company. The filed rate revision would equal an average statewide increase of 19.1%, but would have varied in different areas of the state from a low of -5.0% to a high of +44.4%.

Commissioner Donelon says that after an extensive review of the filing and consideration of multiple factors including data provided by State Farm, the rate revision was determined to be unreasonable. Determining factors include use of an excessive loss trend by State Farm, as well as an unreasonable hurricane risk provision. Also of concern is the significant weight given the latest version of the EQECAT hurricane model used by State Farm in justifying their revision. The EQECAT model’s projected hurricane loss provisions are 150% higher than projected hurricane loss provisions produced by the two other industry hurricane models utilized by State Farm in this filing, without adequate supporting evidence for the difference.

Commissioner Donelon said, “When a rate revision is filed, we use all evidence available to make the determination as to whether the revision is reasonable and justified. In this case, State Farm Fire and Casualty falls short of proving the need for an increase of this magnitude.”

In 2008 State Farm Fire and Casualty Company had a market share of 27% of all Louisiana homeowners policies and is the largest homeowners policy provider in the state. Questions regarding the declination of the rate request can be directed to the Louisiana Department of Insurance Public Affairs Office at (225) 342-4950.

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