State Farm rating system could mean higher homeowner insurance premiums
Published 7:00 am Thursday, February 12, 2015
State Farm is currently testing an insurance rating system in Mississippi, which a local fire official said could increase insurance rates for homeowners further away from district fire stations.
In 2013, the insurance carrier started using the grid-based rating system, instead of ratings used by the Mississippi Insurance Department, MID’s Property and Casualty Director John Wells said.
“The change was approved on a trial basis by the commissioner, so it’s not set in stone,” Wells said. “We’re continuing to study how this affects homeowners. Currently, State Farm is running the grid system in 49 states.”
Steve Simkins, who deals with legislative regulatory work for State Farm in Mississippi, said the grid-based system uses a geographic information system in order to calculate data associated with the area of the home.
“We did away with the public protection class, which uses a ranking system from one to 10 in order to arrive at a premium for a household,” Simkins said. “Instead of using what we think may happen, we use loss information to collect what does happen. We would take loss associated with fire and other perils that could affect a house.”
However, the rating system is causing an increase in insurance premiums for homeowners near fire stations, said Henleyfield Volunteer Fire Department Chief Scott Sullivan.
“For 14 years, homes around our fire district have been rated a class eight by the Mississippi insurance rating bureau. But now, an estimated 550 homes could lose class rating from eight to 10 because of the system changes,” Sullivan said.
He said as a result of the change, homeowners could notice their insurance rates go up by as much as 45 percent.
“A couple of years back, we improved our department’s rate by purchasing a new fire engine, and homeowners nearby benefitted from that,” Sullivan said. “In order to reduce the rate for homeowners now, the fire department has to purchase land to build a secondary station and get a new truck.”
He said the issue will be discussed further at an upcoming public meeting, which will be held at the Henleyfield Station on Highway 43 N. on March 7 at 6:30 p.m.
“Number one, we’re going to see if we can get participation from the community, and we need a minimum of eight volunteers at our station, according to the Mississippi State Rating Bureau,” Sullivan said. “Then we have to raise money for a truck and land to build the secondary station, which will reduce the insurance rates.”
“We support fire services across the country, and don’t want in any way to hinder them,” Simkins said. “As these fire departments improve their ability to fight fires and improve losses, which we encourage, our policy holders will be seeing a decrease.”
So far, other insurance carriers in the state of Mississippi are still using the public protection class system, Wells said.
“I’m sure later on the other insurance companies will follow suit behind State Farm,” Wells said.