State Farm will pull out of Florida property insurance market

[thelakelander]

TALLAHASSEE â€" State Farm Florida announced today it has notified the state that it will no longer sell property insurance.

The decision will affect more than 1 million homeowners and renters and also affect personal liability and boat policies.

The Illinois-based insurer can't do anything before completing a regulatory review in 90 days and is then prohibited by law from discontinuing any policy before giving a six-month notice.

State Farm said it has proposed a two-year plan that will allow its customers to find other coverage.

Its 2.8 million auto customers in the state are not affected, State Farm said.

The insurer cited dwindling reserves when it applied for a 47-percent rate hike with the state last year. Insurance Commissioner Kevin McCarty denied the rate hike for a second time on Jan. 12.

In August, Gov. Charlie Crist said he would support a decision to reject the increase.

"Enough is enough," Crist said.

Jim Thompson, president of State Farm Florida, said, “Faced with steeply declining resources to cover future claims and expenses, State Farm Florida has little choice.

“This is not an action we wanted to take, but one we must take given the realities of the Florida property insurance market. We regret the impact this will have on our customers, employees and agents in Florida.”

State Farm could have taken its case to the 1st District Court of Appeal.

http://www.jacksonville.com/news/2009-01-27/story/state_farm_will_put_out_of_florida_property_insurance_market

[reednavy]

Crooks anyway. I heard this on the news at noon, and was floored, but not surprised as well. The way they screwed people in 04 here and with the whole Katrina in SoMiss surge did damage before wind scheme that failed.

Just FYI, their SE Region HQ is based in my hometown, Murfreesboro, TN.

[stjr]

I am no sympathizer of insurance companies but neither am I of the State foolishly exposing us taxpayers to unlimited exposure for a major hurricane through the state-owned Citizens Insurance. If Florida has a major hit, we taxpayers will be charged thousands of dollars each and/or the state will face bankruptcy.  Meanwhile, we, especially North Florida residents, are at risk and subsidizing mostly wealthy and uncaring South Floridians who continue to build and invest in hurricane prone areas due to unnaturally low insurance premiums.

Neither State Farm, nor any insurer, can change the statistical fact that Floridians are failing to pay in insurance premiums anywhere near appropriately for the risks we face from Mother Nature. I am sure if SF saw anyway to make money here, they would stay.  What happened to free and open markets determining the value of risks and leading to the most efficient economic decisions?  Their departure will just drive more people to Citizens further exposing the taxpayers.  The governor and legislature continue to live in the land of Oz and are failing to face the harsh realities.

These same "leaders" also said a few years ago they were cutting our taxes while fully funding our educational needs and balancing the state budget.  Neither could be further from the truth.  And, now, they are using slight of hand to substitute hidden fees and charges in lieu of "taxes" in a feeble effort to return to financial sanity.

It's all political BS.  And the voters stupidly continue to turn away those who would be frank and honest and I say we get what we vote and pay for.  Just like the consequences of our selfish plunge into a consumer frenzy financed by unrealistic debt, so too, will we ultimately pay the real costs of our hurricane exposures.

[DONTBELIEVETHEHYPE]

As a State Farm customer since 1989, I am disappointed...

[BridgeTroll]

State Farm has been my insurance my entire life.  My initial reaction was anger at them.  My anger is shifting to the state.  Seems to me the state should allow State Farm to raise rates and allow homeowners to decide whether or not to stay with the company... either way I am quite pissed off.

[Karl_Pilkington]

well they can kiss my A$$ when it comes to any insurance.  I currently insure three cars and my home with them and pay good money for that, see ya State Farm.  I've never had a homeowner claim, live in a non-flood area and my house has been there for over 100 years, it ain't going anywhere.  So they want to use the 04 hurricanes as their excuse?  good riddence.

Yeah like coastal carolina isn't a hotspot for hurricanes, or the entire west coast for fires that go on every single year, or middle america for both floods and tornadoes,  SF is a joke!  Go to Canada, seems pretty safe there except for the fact that only 33 million people live there, less than California.

Just read that State Farm made over 5 billion in profits last year and the year before that!  Awww but the wholly owned Florida State Farm is not doing as well, I guess Florida was cutting into that profit and not allowing the SF executives to buy that solid gold garbage can they were expecting.  Cry me a river.....

[BridgeTroll]

Here is a link explaining State farms position...

http://www.statefarm.com/florida/about.asp#contact

[Karl_Pilkington]

Isn't the whole concept of insurance to spead the loss and risk?  So SF decided it didn't want to share Florida's risk with the rest of the country, so they specifically formed a corporation called State Farm Florida and now SFF isn't doing all that well, meanwhile the parent company is awash in profit.  So by sticking it to us, floridians, they can increase their overall profit margin and further minimize their risk.  Its a total shell game and a whitewash job by State Farm.

Their motto is "Like a good neighbor, State Farm is there" ha talk about a crock of SH$T!  IMHO if they don't want to write homeowners policies here they can take their auto and life with them!

[jaxtrader]

I'm amazed that any private insurer is willing to underwrite policies in FL at the rates the state will allow them to charge. The state  government's decision  to write insurance on coastal properties at below market rates will go down in history as one of the largest blunders in  the history of public finance.

[BridgeTroll]

I am guessing there is a law requiring insurers to insure everyone.  Seems they could stay in business if they simply dropped coverages for those within say 2 miles of the coast.  Looks like many floridians are paying for the few who live right on the coast.

[pwhitford]

I'm amazed that any private insurer is willing to underwrite policies in FL at the rates the state will allow them to charge. The state  government's decision  to write insurance on coastal properties at below market rates will go down in history as one of the largest blunders in  the history of public finance.

While no insurer should be confused with a Good Samaritan (they are in business of making a profit, not being our "buddy"), you have absolutely isolated the true heart of the problem.  The unforgivable "development at all costs, in all places" mentality that creates and perpetuates dangerous, destructive, ultimately devastating artificial environments to sustain itself is what is speeding the destruction of the insurance market here in Florida, along with our infrastructure, natural resources and environment.  No one should be allowed to build on a beach, swamp, wetland or marsh (or anyplace else, for that matter) unless they can support the true and actual expenses of their “development”, including the cost to insure and maintain it at market rates â€" not at the artificially suppressed and manipulated rates concocted to foster ill-advised over development.

There …. now I feel better.

[stjr]

Isn't the whole concept of insurance to spread the loss and risk?

Risk should be spread among those exposed to similar perils and probabilities of same.  So all those exposed to hurricanes in Florida should share the risks.  Californians should share earthquake risks.  One has nothing to do with the other and I doubt residents of either state would care to pick up the tab for the other.

The other factor that may force insurers into having state-defined risks pools is the fact that insurer's rates are regulated by each state.  This more or less appears to drive insurers to create profit and loss figures by state.  Once that is done, it becomes pretty obvious where they make it... and where they lose it.

Just like retailers or airlines pull out of markets not supporting their business models, so too, will insurers.  Hey, it's the free enterprise system.  There is nothing in our constitution that says we are guaranteed the right to have insurance offered to us by State Farm or anyone else (by the way, I think Allstate pulled out a while back as well on property in Florida - I guess they really aren't "all-state" anymore  - And, I think Nationwide refuses to write new property in Florida as well.  Do we have a pattern forming here?).

FYI, I have 9 policies with State Farm so I am not happy to start over.  But, I have no choice so I will move on.  I can tell you I have had insurance with at least 4 insurers that went bankrupt since Andrew.  So, just because you find cheaper or equal insurance to State Farm won't mean you will get your claims paid when the big one hits. Then, you will understand the point State Farm is making.  Your premiums ultimately pay for your claims.  Too few premiums and somebody's claims will not get paid! 

[BridgeTroll]

http://www.jacksonville.com/opinion/letters_from_readers/2009-02-01/story/state_farms_decision_to_leave_puts_states_citizens_on_

State Farm's decision to leave puts state's citizens on brink

Story updated at 10:17 AM on Sunday, Feb. 1, 2009     

State Farm's decision to quit providing homeowners insurance in Florida shows that the state's insurance market simply can't survive in its current form.

Moreover, the company's exit will add to the financial risk that Florida would face if costly storm damage occurs.

Unless Gov. Charlie Crist and the Legislature swiftly make several painful but necessary changes to Florida's current insurance system, State Farm's retreat places the entire state in grave fiscal peril.

Inaction means that Florida's taxpayers will become practically the only major underwriter for coastal property owners, whose homes are among the priciest and most exposed to storms.

That could literally mean bankruptcy for a state that's already dealing with a budget crisis.

Whatever State Farm's faults as a company, it at least could back its promises with actual assets - about $60 billion worth.

Moreover, it charged less than many of its competitors while providing insurance for about one-fifth of all Florida homes.

Only the state itself, through Florida Citizens Property Insurance Corporation, sells more homeowners insurance in Florida.

Partly because State Farm is a mutual company operating on a not-for-profit basis, it also wrote lots of coastal coverage that shareholder-owned companies tended to avoid.

Without State Farm, no similarly strong private company exists to take up the slack.

In the wake of the ill-conceived property insurance "reforms" of January 2007, every sizeable out-of-state provider of homeowners insurance has either entirely withdrawn from the state or severely curtailed its business.

The only companies writing significant numbers of new policies are Florida-only companies with fewer real assets.

Many of these in-state companies and Citizens rely almost entirely on the state government's own reinsurance entity, the Florida Hurricane Catastrophe Fund.

But the Cat Fund doesn't have sufficient real assets to back up its promises. Rather than making investments, as private reinsurance companies do, the Cat Fund plans to finance its payouts by selling enormous amounts of bonds after a major storm hit, with the debt to be repaid via surcharges on insurance premiums for homes and vehicles.

Under the current law, the state could assume liabilities totaling $32 billion. However, because no state has ever sold more than $11 billion worth of bonds all at one time, the Cat Fund simply cannot keep its promises.

As a result, a costly storm or series of storms almost certainly would cause the collapse of Citizens, the Cat Fund, and many nominally "private" companies. Yet, because the state of Florida guarantees the solvency of all these entities, Floridians would end up footing the bill.

Because Florida has no personal income tax and caps property tax rates, the government has no practical way to collect the tax revenue needed to clean up the mess. If Congress doesn't have the appetite to bail out Florida - and there's a good chance that it won't - the state might well have to take a trip to bankruptcy court.

When the Legislature convenes in March, lawmakers need to consider some tough measures to pull Florida back from the brink.

They should let the rates rise for both Citizens and other insurers - a step that will require political courage. They should reduce the size of the Cat Fund and encourage Floridians to reinforce their homes against hurricanes.

Floridians - especially those living near the coast - will have to pay higher insurance rates. The alternative is much, much worse.
Eli Lehrer is an adjunct scholar of the James Madison Institute, a nonpartisan policy center in Tallahassee.

[stjr]

Could the Florida Legislature actually do the right thing for once?!  Amaze me, please!!

From the Florida Times Union:

Lawmakers want State Farm back, at any price
Insurance commissioner blasted for rejecting 47 percent rate increase
[/color]
TALLAHASSEE â€" Leaders from both parties urged Insurance Commissioner Kevin McCarty to try to bring State Farm Florida back into the property insurance market, and the top Democrat in the Senate upbraided McCarty at an afternoon committee meeting.

“I really would like for you to go back and assess why you should bring State Farm back into this market,” said Senate Minority Leader Al Lawson, D-Tallahassee. “Because I think what you have done is a travesty. It does not make sense.”

McCarty is facing bipartisan anger because of the insurance company’s decision, announced in January, to withdraw from the state. State Farm announced its move little more than two weeks after McCarty rejected the company’s request for a rate increase that would have averaged 47 percent statewide.

McCarty and Gov. Charlie Crist, who has said Floridians would “be much better off without” State Farm, have consistently cast the insurance company as the unfair party in the conflict, implying its voracious appetite for profit drove it to call for ever higher rates.

On Thursday, McCarty pointed out that State Farm’s rates have surged about 530 percent since Hurricane Andrew struck Florida in 1992, including a 52.8 percent increase two years ago. And the Office of Insurance Regulation has noted that a judge turned down State Farm’s request before McCarty rejected it.

But lawmakers have taken a different tack.

They have consistently questioned whether McCarty thwarted the free market and forced out the largest private property insurer in the state.

Ways and Means Committee Chairman J.D. Alexander, R-Winter Haven, said many consumers are finding even worse deals as they look for new plans before State Farm finishes its withdrawal.

“My office has been inundated with calls from folks who go to replace their State Farm policy and pay more than 42 percent more on a routine basis for, quite frankly, many companies who don’t have the capacity to make sure they pay” if a hurricane hits, Alexander said.

“I think it’s a great loss to this state to lose State Farm,” he said after the meeting.

Others question why State Farm wasn’t granted the increase when other insurers, including taxpayer-backed Citizens Property Insurance Corporation, have been.

“I’m concerned that we allow Citizens to keep raising rates, but we won’t allow the people who are in the private market to do the same,” Sen. Tony Hill, D-Jacksonville, said after the meeting.

“I think it’s more than just the increase, though,” Hill said.

Hill and other lawmakers say the open conflict between the company and the state’s top officials might make it impossible to lure State Farm back, even if the company was granted the rate hike.

The company plans to pull out over a two-year period. Each of its 1.2 million policy holders get at least six months’ notice before the policy is canceled. Parent company State Farm Mutual of Illinois will continue to offer auto, life and health insurance in Florida.

The company will eventually cancel more than 700,000 homeowners policies, almost 80,000 condominium owners policies and almost 62,000 renters policies. Almost 58,000 boat owners would be affected, too.

[BridgeTroll]

Too late for me... I already moved.  I decided not to wait for a miracle or a stampede or hurricane season.