State Farm Evacuates Florida Property Insurance Market
State Farm Evacuates Florida Property Insurance Market
By Linda Kleindienst
TALLAHASSEE — State Farm, Florida’s largest private home insurer, on Tuesday announced its plans to withdraw from Florida’s property insurance market because of the hurricane risk.
Over the next two years, the company—America’s second largest private insurer – plans to discontinue 1.2 million property policies in the state.
The company will, however, continue to sell its lucrative lines of auto, health and life insurance.
Company officials blamed the state and the Legislature for its decision. Two weeks ago the state rejected a company request filed last summer to increase rates by 47 percent.
“Faced with steeply declining resources to cover future claims and expenses, State Farm Florida has little choice,” said Jim Thompson, the insurer’s president, in a press release.
“This is not an action we wanted to take, but one we must take, given the realities of the Florida property insurance market,” Thompson said. “We regret the impact this will have on our customers, employees and agents in Florida.”
State officials said they were not surprised by the announcement and indicated they might seek legal action against State Farm. The proposal must be approved by the state, which has 90 days to act. If approved, State Farm must give a six-month notice before a policy can be dropped.
“I will do every thing in my power to protect Florida consumers from unnecessary destabilization of the insurance market that this might cause and to ensure that Florida consumers are protected and have access to insurance at rates that are not excessive or unfairly discriminatory,” said Florida Insurance Commissioner Kevin McCarty.
McCarty’s office has been working with legislative leaders on a proposal to significantly limit the number of non-renewals a company can issue in a year.
Mark Wilson, president and CEO of the Florida Chamber of Commerce, said State Farm Florida’s announcement should serve as a wake-up call that conditions in Florida’s property insurance market are unsustainable and the state is are financially unprepared for a major hurricane.
“It is critical that Florida look at making improvements to restore the health of our property insurance market and reduce our overreliance on state-run insurance companies to provide affordable hurricane insurance by charging less than actuarially sound rates,” he said.
“This decision by State Farm is a clear indication of the risk inherent with Florida’s unstable property insurance market and our overreliance on post-hurricane assessments. Hopefully we won’t have to see them leave the state, but we recognize the significant risk private insurers must be willing to accept to write hurricane insurance in Florida.”
Impacted Lines of Insurance
Below are listed the premium and number of some policies that will be impacted by State Farm Florida’s discontinuance of certain product lines:
Line Written, Premium for 12 months ending 9/30/2008. Policies in-force
Boatowners Policy, $33,497,854, 57,982
Business Policy, $76,909,075, 30,855
Commercial Inland Marine, $875,224, 2,661
Commercial Liability Umbrella Policy, $2,741,154, 3,749
Contractors Policy, $9,142,205, 3,767
Homeowners, $1,054,918,245, 703,357
