State Farm see's rate inscrease.

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State Farm will increase insurance rates 10 to 12 percent in coastal counties
Published: Friday, October 01, 2010, 8:00 AM Updated: Friday, October 01, 2010, 10:22 AM
Jeff Amy, Press-Register Jeff Amy, Press-Register
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State Farm Fire and Casualty Co. said Thursday that it would increase rates by an average of 10 percent to 12 percent for most Mobile and Baldwin policyholders.

Statewide, including the two coastal counties, customers will pay an average of 8.4 percent more.
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The Alfa Mutual Insurance group, the state’s second-largest property insurer, raised rates statewide by an average of 18 percent on Sept. 1. Allstate Indemnity Co., the largest branch of the state’s No. 3 homeowners insurer, raised rates by a statewide average of 9.9 percent on Sept. 13.

The rate changes continue a trend that has seen prices for most Alabama homeowners insurance far outpacing the rate of inflation.

The increases were reviewed by both in-house and contract actuaries and “found to be necessary,” said Ragan Ingram, chief of staff for Alabama Insurance Commissioner Jim Ridling. The Insurance Department must approve such changes in advance.

Effective Nov. 1, State Farm will impose an average increase of 9.9 percent in areas south of Interstate 10 in Mobile County and in areas generally west and south of U.S. 98 in Baldwin County, the company said. For most of the rest of the two counties, the increase will be 11.9 percent.

State Farm has more than 40,000 property policies in the coastal counties, although that includes renters, condominium and other types of policies.

Spokesman David Majors said the rate increases cover projected costs, based on past trends.

“Our overall claims in Alabama have increased,” he said, both in number and in average cost.
Coastal insurance rate increases

State Farm rate history: 

* 2008: 12 percent to 18 percent increase in Mobile and Baldwin counties; 0.9 percent decrease statewide. 
* 2009: No change in Mobile and Baldwin, 19.1 percent increase statewide. 
* 2010: 10 to 12 percent increase in Mobile and Baldwin, 8.4 percent increase statewide.

Alfa rate history: 

* 2008: No change. 
* 2009: 6.5 percent to 16.6 percent in Mobile and Baldwin, 5.8 percent to 6.5 percent statewide. 
* 2010: 18 percent statewide. 

Allstate Indemnity rate history: 

* 2008: 9.9 percent statewide. 
* 2009: No change. 
* 2010: 9.9 percent statewide. 

Sources: Press-Register files, Alabama Department of Insurance

Spokesman Jeff Helms said Montgomery-based Alfa has suffered more losses from inland tornadoes and windstorms, prompting its rate change.

“We have seen an increased pattern of very severe spring storms,” Helms said.

Statewide, homeowners insurance has been expensive, compared to national averages. The typical Alabama policyholder paid $904 for one year’s coverage in 2007, the most recent data available. That was 12th highest among states. Nationwide, the average house cost $822 to insure.

There’s no data available for how much insurance costs along the Alabama coast, but premiums are known to be higher.

Rate increases had paused in 2007 after steep increases following Hurricane Ivan in 2004 and Katrina in 2005.

A few State Farm policyholders may get breaks. The company said that it would increase its discount for combining auto and homeowners policies from 20 percent to 25 percent.

Policyholders who can’t or don’t buy wind and hail coverage from State Farm will also get breaks. Non-wind homeowners policyholders north of Interstate 10 in Mobile County or generally north and east of U.S. 98 in Baldwin County would only pay 31 percent of the face value of a homeowners policy, down from 40 percent. Renters and condo unit owners also would get bigger breaks.

“I don’t know why State Farm is doing this,” said Earl Janssen of Foley. Janssen, a State Farm policyholder, is a member of the Homeowners’ Hurricane Insurance Initiative, a group that lobbies for lower insurance rates.

Janssen said that he pays $3,300 a year right now to cover his 2,000-square-foot house. Janssen carries a $5,000 deductible for all other risks than wind, meaning he would recover nothing from a small theft loss, for example. On the hurricane part of the policy, he has a 2 percent deductible.

“We’ve had no damage or hurricanes in the last few years here,” Janssen said. “Their profits have gone up.”

State Farm, based in Bloomington, Ill., posted a $777 million profit in 2009, compared to a $542 million loss in 2008.

Majors said that State Farm has found that the number of claims and the cost of settling each claim both go up during recessions, saying that’s one factor that may have contributed to the increase.

“The homeowners line of business has been a challenging line of business for the insurance industry as a whole in terms of profitability,” said Alfa’s Helms.