Posted: May 6, 2010 11:12 PM by Associated Press
State Farm Fire and Casualty Co., Louisiana's largest residential insurer, won an average 9.9 percent rate increase Thursday for homeowners' coverage in Louisiana.
However, coastal areas vulnerable to hurricanes will be bearing much of the brunt.
Insurance Commissioner Jim Donelon approved the increase, just about two months after rejecting State Farm's request for an average 19.1 percent hike. Donelon called that proposal unreasonable and unjustified.
State Farm said it needs higher rates to have adequate reserves for future storms. The rate increase is not based on past losses, such as the four major hurricanes that have hit Louisiana since 2005, and takes into account the company's future projection of losses.
The company received an average 8.3 percent increase last year in Louisiana after asking for 13.7 percent.
According to State Farm, the New Orleans region will see a 17.7 percent increase, while rates in the Lake Charles region will go up 22.5 percent. Alexandria homeowners can expect a 5.5 percent increase. Rates in the Monroe and Baton Rouge areas will be unchanged, while the Shreveport-Bossier City area will see rates go down 6 percent.
The largest overall increase - 26 percent - will affect homeowners in St. James and St. John the Baptist parishes, including LaPlace. The largest overall decrease - 6.7 percent - will be seen in Assumption, Iberia, St. Charles and Vermilion parishes.
In denying the earlier request, Donelon questioned State Farm's use of a loss projection model that called for 150 percent higher loss provisions than projected by two other industry models. He said State Farm did not provide enough evidence to support the difference. Donelon said the latest filing dropped the use of the challenged model.
The filing totals $38.1 million for State Farm's 301,000 policyholders.
The new rates go into effect immediately for new policies and on July 1 for renewed policies.