People’s Trust faced persistent questions
While Florida property insurance rates are trending downward, a few companies are seeking rate increases, especially for those applied in 2023 under the use-and-file rate submission system. One of them, People’s Trust Insurance Company, was the subject of a recent public rate hearing that we found interesting for its tough questioning and instructive for future rate filers.
People’s Trust is seeking a statewide average rate increase of 14.8% increase in its Dwelling Fire (DP-1) policies on about 26,000 policies from a filing it made, then implemented, in August 2023. The Florida Office of Insurance Regulation (OIR) usually restricts public rate hearings to increases of 15% or greater. But this filing, taken in close proximity to its 2023 annual filing increase, which OIR previously approved, together have a cumulative impact of a nearly 30% hike.
This hearing contained tough, persistent questioning on the timing of both filings, just how reinsurance costs were allocated by territory, and the company’s higher-end profit and contingency factor. All in a back-and-forth that acknowledged trade secret information and sought to protect it, while still urging the company to explain its reasoning in a public hearing setting.
Company representatives explained that this filing was primarily due to increased reinsurance costs in 2023, growing from 58.6% of hurricane premiums to 73.1%. While its annual rate filing increase of 14.4% was supposed to be effective on August 30, 2023, there wasn’t enough time, they explained, for I.T. programming to meet that date and so it was pushed back to September 24, 2023, to coincide with the effective date of this current filing’s14.8% increase.
“You didn’t consider the impact on the policyholder getting doubled-up?” asked OIR actuary Bob Lee. “The policyholders were going to get doubled-up on the effective date in August, no matter what,” replied People’s Trust Chief Actuary Peter Forester. “It’s just there were policyholders that renewed between July and August 11 that did not receive the increase for the annual filing,”
Lee pressed the company for any other reason than higher reinsurance costs for its rate increase request, and when pressed back by the company, said he could say nothing else, given part of the filing was labeled as “trade secret.” Lee also asked exactly how the risk was reflected in the cost of this filing and what profit was built-in. When the company answered that the profit and contingency provision is 9%, Lee said “Just so the public knows, the profit tendency, and this is not at all a trade secret, is 4.2% unless you do a separate study. So this is high. That’s all I want to say.” There was more contentious back-and-forth regarding whether there was any profit adjustment by territory (the answer was no) and whether the company used anything other than average annual losses in figuring reinsurance cost allocation (the answer was yes, with the company declining to identify the exact factors.).
The current filing’s proposed rate increase, if approved, would raise the average premium by $548. The company just submitted its 2024 annual DP-1 rate filing with a neutral (0%) overall proposed change. Commissioner Yaworsky later told the Tampa Bay Times that although public hearings are mandatory for rate increases of 15% or higher, OIR will exercise its prerogative to hold hearings whenever it deems necessary, as it did here for People’s Trust.
LMA Newsletter of 6-10-24
