State Farm Florida Refusing to Renew Home Insurance Policies
Feb. 1, 2010 – Officials for State Farm Florida recently announced thousands of existing customers in mostly coastal areas would receive non-renewal notices for their homeowners insurance policies starting this week.
The non-renewal notices will be sent to select State Farm Florida policyholders whose current insurance plans begin expiring on Aug. 1 and afterward. The notices are being sent as part of State Farm Florida’s efforts to reduce the insurer’s exposure to properties more likely to suffer extensive damages in the hurricane-prone state. Company officials said they are whittling away 125,000 of the about 714,000 properties currently insured through State Farm Florida, which is a subsidiary of State Farm Mutual Insurance and the largest private-property insurer in the Sunshine State.
The reduction in the number of properties insured is part of an agreement State Farm Florida officials reached with Florida insurance regulators after the insurer earlier declared its intent to cease insuring homes altogether in Florida.
Florida insurance officials in 2008 denied a request by State Farm Florida to increase its homeowners insurance rates by more than 47 percent after posting significant losses. The insurer has suffered severe losses since the state was pummeled by four hurricanes in one month during the 2004 Atlantic hurricane season. The insurer paid out billions of dollars in claims after the 2004 hurricane season, and its net worth decreased by nearly 25 percent since 2006. State Farm Florida officials say the homeowners insurance company has paid out $1.21 in claims for every dollar in premiums it has collected since 2000.
State Farm Florida borrowed $750 million from its parent company in 2005 and has not repaid the amount. State Farm Florida officials said without a rate increase, the company likely couldn’t continue insuring homes in the hurricane-prone state. The firm already stopped writing new homeowners insurance policies in Florida two years ago.
State Farm Florida officials last year announced a two-year plan to end its insurance coverages in Florida for homeowners, renters, condominium owners, personal liability, boats, personal articles and business property and liability. Although it is a private insurer, the move required state regulatory approval.
But instead of ending all homeowners insurance business in Florida, company officials reached an agreement with Florida insurance regulators allowing the insurer to reduce the number of homes insured in mostly coastal areas and increase its property insurance rates by almost 15 percent for homes and condominiums.
State Farm Florida Exit Hearing Postponed
Dec. 3, 2009 – An administrative hearing regarding a proposed exit from Florida’s homeowners insurance market by its largest player has been postponed until Jan. 25, although some speculate the hearing may never occur.
Florida insurance officials and officials for State Farm Florida – the Sunshine State’s largest private home insurer – are negotiating terms of the firm’s planned exit from the Florida homeowners insurance market. But the hearing might never happen if both parties agree to a plan allowing State Farm Florida to continue providing homeowners insurance coverage in addition to its other property and casualty insurance offerings.
Florida Insurance Commissioner Kevin McCarty previously said he wants to work out an arrangement enabling State Farm Florida to continue offering homeowners insurance and other property insurance coverages in the hurricane-prone state. McCarty in 2008 denied a request by State Farm Florida officials to increase homeowners insurance rates by an average 47.1 percent. The state’s Division of Administrative Hearings upheld the decision a year ago, which was appealed to and affirmed by the state’s First District Court of Appeals.
McCarty accused State Farm Florida officials of using the rate denial as a pretext to pull out of the state’s homeowners insurance market, but company officials claim financial realities are forcing the insurer to exit the market unless it can charge higher premiums.
“This is not an action we wanted to take but one we must take given the realities of the Florida property insurance market,” State Farm Florida President Jim Thompson said. “Faced with steeply declining resources to cover future claims and expenses, State Farm Florida has little choice.”
When initially denied the requested insurance rate increase, State Farm Florida announced a two-year plan to withdraw from the state’s property insurance market while continuing its life, health and auto insurance businesses. But Florida officials have denied the withdrawal request unless the insurer can find other private insurers to assume the more than 200,000 property insurance policies underwritten by State Farm Florida.
McCarty cited concerns that too many people would opt for the state-backed Citizens Property Insurance Corporation.
State Farm Florida officials requested the 47 percent rate hike after posting significant losses in recent years. The Florida subsidiary of State Farm Mutual Insurance has suffered severe losses since the state was pummeled by four hurricanes in a month during the 2004 Atlantic hurricane season.
State Farm Florida officials say the insurer has paid out $1.21 in claims for every dollar in premiums it has collected since 2000. The insurer paid out billions of dollars in claims after the 2004 hurricane season, and its net worth has decreased by nearly 25 percent since 2006. The insurer borrowed $750 million from its parent company in 2005 and has not repaid the amount.