MIAMI (CBS4)- If you’re with State Farm Florida Insurance you may see an increase in your bill. That’s because regulators approved an average rate hike of 18.8 percent for Florida homeowners covered by State Farm, according to state documents filed Friday.

The higher rates, which are less than the 28 percent boost State Farm sought, will take effect July 1 for new business and beginning July 15 for renewals. Separately, Insurance Commissioner Kevin McCarty approved a 62 percent increase for State Farm’s commercial residential policies, which cover homes that are owned by a person or business entity and rented to others.

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While the rate increase was significantly less than it asked for, State Farm isn’t talking about pulling out of Florida, as it did the last time a major rate boost was turned down in its entirety, according to CBS4 news partner The Miami Herald.

In Miami-Dade and Broward, where State Farm has more than 65,000 policies, rate changes will range from a 9.8 percent decrease to a 64.3 percent increase, depending on the type of policy and exact area, Office of Insurance Regulation’s data show.

The rate approval “is an important step for State Farm Florida to remain viable in this marketplace,” company spokesman Michael Grimes said. “We’ll continue to work with regulators and legislators to encourage market reform.”

Florida has been spared a major hurricane for more than five years. But State Farm, the largest private insurer in Florida, maintains that it needs to boost premiums for its 632,000 policyholders because of rising costs unrelated to hurricanes.

“Our financial condition has deteriorated over the last two years,” State Farm pricing manager Adam Swope told the Florida Office of Insurance Regulation during a February hearing. “Over the last almost three years, we’ve lost over $500 million of surplus. This company has lost a substantial amount of surplus in years with no hurricane events.”

One of the biggest complaints from State Farm and other property insurers is that sinkhole damage claims are driving up costs, far exceeding the premiums relative to sinkhole exposure. They allege many of the claims are bogus. Attorneys representing homeowners say insurers are just trying to avoid living up to their obligations.

The Senate is considering a bill that would free insurance companies from a requirement to offer comprehensive sinkhole insurance.

The approval comes as the state legislature moves forward with a measure that would let state-run Citizens Property Insurance Corp. increase premiums by up to 25 percent a year. Currently, under state law Citizens cannot raise rates more than 10 percent annually.

Advocates say they want Citizens to return to its roots as an insurer of last resort, pushing people to get coverage on the open market.

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With support of the Republican-led Legislature and Gov. Rick Scott, the measure is likely to become law.

Citizens, with a policy count of 1.3 million, is the only property insurer that trumps State Farm Florida.

Last year, State Farm filed with regulators to let it cancel all its homeowners policies with sinkhole coverage and offer those customers a new hazards policy that includes catastrophic ground collapse, but would force customers to buy additional sinkhole protection. Grimes said that action is on hold as his company waits for the Legislature to act.

McCarty, the insurance commissioner, has approved double-digit rate increases for a string of property insurers over the past two years in part based on rising sinkhole payouts.

Three years ago, State Farm threatened to pull out of Florida’s property insurance market. Under a deal struck with regulators in late 2009, it was allowed to drop some 125,000 homeowners across Florida to limit its exposure and raise rates an average 15 percent for those it kept.

Regulators and consumer advocates were concerned that the purge plus this new round of higher State Farm rates would push more people into state-run Citizens Property Insurance, already by far the largest property insurer with more than 1.3 million policies. If Citizens is unable to pay claims from a major hurricane, all Floridians with an insurance policy could be assessed to help make up the difference.

McCarty’s actions on Friday dealt with the average rate increase, meaning some policyholders may see little change and some may see rates go up substantially higher.

During the February hearing, Belinda Miller, general counsel for the Office of Insurance Regulation, questioned if some customers would be surprised to see their premiums increase 40 to 50 percent if the rate passes. She asked Swope if State Farm considered capping rates to “prevent the shock in the marketplace.” The carrier did, he said, but decided against it.

(©2011 CBS Local Media, a division of CBS Radio Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed. CBS4 news partner The Miami Herald contributed material for this report)

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