Mississippi Still Allows Territorial Insurance Rating; Must First File Statewide Rates

Published May 31, 2016

Contrary to recent news reports, territorial rating for property insurance remains alive and well in Mississippi.

“We’re going to make the biggest insurers file statewide rates and then allow them to come back and file adjusted rates” based on where a risk is located, Mississippi Insurance Commissioner Mike Chaney told Finance, Insurance & Real Estate News.

Several publications had reported Chaney would no longer allow territorial rating.

The confusion stemmed from a fight over a 45 percent rate increase requested last year by State Farm Insurance Companies for properties in three coastal counties with significant hurricane exposure.

Chaney denied the rate request. In December Chaney and State Farm agreed to a 19.5 percent rate increase for the company’s coastal county policyholders. The rate hike took effect in February.

In Mississippi’s 79 other counties, State Farm’s rate hike requests averaged 2.8 percent, according to Chaney.

After announcing the rate increase agreement, Chaney told reporters he would begin requiring the larger insurers to file statewide rates. He added they could then file amended rates, but that part of his statement for some reason was ignored or missed by some news organizations.

“What the commissioner is asking is not unusual or out of line,” said Eli Lehrer, director of The Heartland Institute’s Center on Risk, Regulation, and Markets. “If he says territorial rating is okay but insurers must start with statewide rates, that is a little more work, but by itself it isn’t that big a deal. What matters is that they end up with fair, risk-based, and adequate rates.”

“We are taking an aggressive stance to protect insurance consumers, make sure we have a viable insurance industry, and ensure claims can be paid,” Chaney said.

He said he decided to require the filing of statewide rates because, while reviewing State Farm’s initial rate request, he and staffers realized the company was using different data for the same classes of risks, including different probable maximum losses and after-tax profits.

“They cannot use different data for the same classes,” Chaney said. He also said while the company adjusted rates up for hurricane risk in the coastal counties, it did not adjust down for reduced risks for certain other losses, including hail and tornado damage. Those risks are much greater in the inland areas.

Steve Stanek ([email protected]) is a research fellow at The Heartland Institute and managing editor of Budget & Tax News.