State Farm is refunding $120 million
Sep 10, 2008
State Farm agreed to refund $120 million to policyholders who weren’t given the correct discounts for strengthening their homes against hurricanes.
BY BEATRICE E. GARCIA
Miami Herald–September 10, 2008
Money back from your insurer?
That’s something Florida homeowners rarely see. But about 98,000 State Farm Florida policyholders will get refunds, averaging $1,225, over the next 12 months because the insurer failed to properly apply credits for wind mitigation. The refunds will total $120 million.
State Farm also agreed to pay a $1 million fine for not complying with the state statute that requires that the discounts be applied to wind insurance premiums, according to the consent order between Florida regulators and the insurer announced late Tuesday.
With about one million policies on its books, State Farm is the largest private insurer of homes in Florida.
The amounts refunded to qualifying homeowners will vary greatly, given the mitigation measures on each home and size of policies.
The credits, in place since 2005, help reduce premiums. The credits are applied for such measures as hurricane shutters, impact-resistant windows and reinforced garage doors. Since the 2004 hurricanes, lawmakers, regulators and insurers have been encouraging homeowners to fortify their homes to decrease losses and lower insurance costs.
Earlier this year, Florida’s Office of Insurance Regulation began auditing all the property insurers that provide residential windstorm coverage to be sure they were applying the credits correctly. Insurers were also required to provide each of their policyholders with a detailed form outlining what discounts each mitigation measure carried for the homeowner’s premium.
In July, OIR notified State Farm of its investigation. After an internal investigation, State Farm identified 98,000 current or former policyholders for refunds.
While OIR isn’t working out similar agreements with other insurers right now, Ed Domansky, an agency spokesman, said this settlement with State Farm “will put other companies on notice to be sure they are compliant. We’re keeping an eye on all insurers.”
State Farm is working with OIR on a timeline for getting the refunds to policyholders, said Justin Glover, a company spokesman.
”Taking steps to fortify our homes against wind damage is very important. Everything Florida consumers can do to reduce storm damage helps to keep property insurance costs down,” said Insurance Commissioner Kevin McCarty.
For current policyholders, State Farm will apply the refunds as credit when policies renew over the next 12 months. For homeowners who are due refunds but have had their policies dropped by State Farm since 2005 or have moved on to another company, the insurer must write them a check within 180 days. Refunds will carry 7 percent interest.
Policyholders who are entitled to the refunds will receive a notice from State Farm. The refunds apply to policies on homes, rentals, condo units and apartment or condominium associations.