Another Private Insurer Wants State Farm Florida Customers

Feb. 23, 2009 – Officials for the Florida-based Northern Capital Insurance Group recently announced they can insure up to 50,000 of the 1.2 million State Farm Florida customers losing their property insurance coverage as the a State Farm Mutual Insurance subsidiary withdraws from the Florida market.

Northern Capital began writing homeowners policies in Florida in August 2006 and has more than $20 billion in insurance coverage in force in the Sunshine State.

The announcement was one of several from competing insurance carriers wanting to have a slice of State Farm Florida’s market share after the insurer requested and received conditional approval to exit the state’s property insurance market over the next two years. State Farm Florida is the state’s largest private insurer and second only to the state-backed Citizens Insurance Company.

Officials for Florida’s fifth-largest home insurer, the Florida Peninsula Insurance Company, recently said they can provide homeowners insurance and other property coverage for up to 100,000 consumers currently served by a State Farm Mutual Insurance subsidiary.

“Over the past four years, we have worked hard to earn the respect and admiration of our customers and independent agents by providing competitive rates, superior customer service and fast, fair claims handling,” said Roger L. Desjadon, chief executive officer of Florida Peninsula. “We thought it was important to advise the Office of Insurance Regulation that we are prepared to do everything we can with our capacity and infrastructure to service those who may lose their coverage.”

Florida Insurance Commissioner Kevin McCarty recently prevented State Farm Florida from putting any of its 1.2 million property insurance policies in state-backed Citizens Property Insurance Corporation and required the insurer to facilitate the transfer of its homeowners insurance policies to other private insurers as directed by the state Office of Insurance Regulation.

The order also requires the insurer to consider offers from other insurance companies to purchase some or all of its business and issue refunds to policyholders who cancel insurance coverage.

Florida insurance officials recently denied a request by State Farm Florida to increase its homeowners insurance rates by more than 47 percent after posting significant losses. 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 homeowners insurance company 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 decreased by nearly 25 percent since 2006.

The insurer borrowed $750 million from its parent company in 2005 and has not repaid the amount. State Farm Florida said without a rate increase, likely couldn’t continue doing business in the hurricane-prone state.

“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.”