This Florida insurance company raised rates 36 percent. Will regulators approve it?

TALLAHASSEE — State regulators took a hard line on a property insurance company that wants to raise rates by an average of 36 percent on more than 64,000 homeowners policies, the company’s second big rate hike in a year.

During a Friday morning hearing, regulators grilled executives from Southern Fidelity Insurance Co., based in Tallahassee, questioning the company’s methodology, viability and reasons for wanting to raise some homeowners’ rates by more than $3,000.

“We made it very clear that we’re concerned about the rating methodology this company has used for years,” said Susanne Murphy, deputy insurance commissioner for the Florida Office of Insurance Regulation.

Regulators made no decision Friday about whether to approve the increases. The company has more than 8,200 policies across Dade, Broward and Palm Beach counties and more than 11,100 across Hillsborough, Pinellas, Pasco and Hernando counties.

Southern Fidelity imposed the increases on July 1, less than a year after regulators approved the company increasing its rates by 31 percent.

For some customers who were renewing their policy in July, that meant they were absorbing both increases at the same time, seeing their premiums rise more than 70 percent on average.

Related: Florida’s property insurance market is ailing. There is no quick fix.

When asked why the company didn’t wait until August, so customers weren’t being hit twice at the same time, the company’s actuarial manager, Jesse Rehberg, said it was the board’s decision.

“We felt it was imperative we get that rate rolling on,” Rehberg said.

If regulators don’t approve this year’s changes, the company will have to issue refunds to customers.

Regulators are in a difficult position with Southern Fidelity and other domestic property insurers, some of which are struggling to stay afloat. Many insurers have been seeking double-digit rate increases, while others have been absorbed or gone out of business. Citizens Property Insurance, the state-run property insurer of last resort, has seen its policy count grow from 463,247 policies last year to an expected 766,000 by the end of this year.

Related: Citizens Insurance approves even larger rate hiks for Florida property owners

Southern Fidelity has seen years of losses, and regulators have approved the company canceling more than 47,000 unprofitable policies since May 2020.

Executives with the company blamed the need for the large rate increases on higher litigation costs and the rising cost of reinsurance, which insurers purchase to subsidize their own business.

But regulators on Friday appeared skeptical of those reasons, focusing instead on the company’s methodology it used to come up with the proposed increases.

In one example, regulators noted the company was basing increases not just on its own data, but on an analysis of other companies’ data. And that outside analysis was based on homes worth $300,000 built in 2021.

Regulators wondered why Southern Fidelity wouldn’t rely more heavily on its own data, or at least use outside data that reflected their own book of business.

“I don’t think what you’ve done here is a generally accepted actuarial technique,” said Kayne Smith, an actuary with the Office of Insurance Regulation. “Surely your book isn’t all composed of $300,000 homes built in 2021.”

“This has been the standard process that we’ve followed in all of our recent filings that I recall,” said Klayton Southwood, a consultant actuary for the company.

Regulators said they’ve warned them for years about using that methodology.

Southern Fidelity also said Friday that it might seek yet another rate increase in the next month or two, leading officials to wonder whether the company’s practices were sustainable.

“I am very concerned about the future financial stability of this company,” the state’s Insurance Consumer Advocate, Tasha Carter, said.

Information from News Service of Florida contributed to this report.