State Farm in Florida [update: will not withdraw]

[grant blackwell]

State farm

While I totally understand this type of reaction please remember that unlike some internet based auto insurers all State Farm policies are serviced by a local agent. These local agents are your neighbors and friends and just experienced the brunt of a decision that they had no control over. Not only did they lose the residential home insurance market but also the commercial insurance business; two-thirds of their revenue stream just evaporated. They are "exclusive" agents, meaning they can't simply pick up another carrier.

While many people will have an ax to grind against State Farm (corporate) please don't forget that the simple act of changing your auto insurance may put your neighbor down the street, ON THE STREET. Just like every other bit of bad news we hear in this current economy there are real live people behind every headline.

disclosure: I'm not connected with State Farm in any way, even as a client, but I do have a close friend who has been an agent in Niceville for many years. He grew up there and insures his family, friends, neighbors and fellow church members. He is one of dozens of agents in our local area that shop at the same stores you do; or at least they used to.

AS A COMPETITOR TO STATE FARM, VERY VERY WELL PUT.. Lets all remember that this is going to hurt a lot of Florida Residents, mostly good honest working folks that make their living associated in one way or another with State Farm.. Thanks for the heart felt reminder.

 

[Smiling JOe]

I understand about the SF offices being locally owned. HOWEVER, SF had the chance to do what is right and from all I hear, they failed miserably in covering clients.

As Mayor and I stated, State Farm left many people high and dry, without coverage, when they moved their NO-coverage area from 2000 ft from the Gulf, to 5000 ft from the Gulf, so they lost most of their existing business in South Walton when that happened. Up until one year ago, I had been a State Farm customer for 18 years.

My personal thoughts are, if SF isn't going to cover my house when the time comes, what makes me think that they will cover my autos when the time comes? Consumers have the choice to speak with their pocket books, and we can either reward or punish bad behavior. I choose to reward good behavior. I do feel bad for the employees of SF, just as I do for any of the other thousands of people who are losing their jobs, or have had their wages chopped during this struggling economy.

 

[TooFarTampa]

I understand about the SF offices being locally owned. HOWEVER, SF had the chance to do what is right and from all I hear, they failed miserably in covering clients.

As Mayor and I stated, State Farm left many people high and dry, without coverage, when they moved their NO-coverage area from 2000 ft from the Gulf, to 5000 ft from the Gulf, so they lost most of their existing business in South Walton when that happened.

My personal thoughts are, if SF isn't going to cover my house when the time comes, what makes me think that they will cover my autos when the time comes? Consumers have the choice to speak with their pocket books, and we can either reward or punish bad behavior. I choose to reward good behavior. I do feel bad for the employees of SF, just as I do for any of the other thousands of people who are losing their jobs, or have had their wages chopped during this struggling economy.

Your point is well taken 30abob, but I have to agree with SJ above. I do feel bad for the agents, but if SF can't find a way to make it work without asking for a 47 percent rate increase, the agents should be unhappy with SF, not the public for exercising its right to choose.

The bottom line is that when SF asked for that huge rate increase last year, it was denied because state regulators said the company did not provide enough evidence to support it. In addition, SF Florida's plan involved buying reinsurance from its parent company, instead of on the open market, where it could no doubt get it cheaper.

Now because things didn't go their way, they're leaving thousands of people in the lurch. What the Legislature really needs to do is eliminate the use of these "pup" companies, and let Florida's risk be pooled with the rest of the nation like it does with every other state.

 

[Bob]

Government mandates caps on insurance company rates. Insurance companies run the numbers and realize they are risking major loss. Insurance companies pull out of the market. Government takes over and insures the people insurance companies felt were a bad risk at the rates the government forced them to charge. Government realizes they can charge certain people one rate and other people another rate independent of risk.

Socialism gains, capitalism dies.

sure, the free market works in the presence of few providers.....capitalism is infallible...that will be the new stimulus package bill name

 

[30ashopper]

sure, the free market works in the presence of few providers.....capitalism is infallible...that will be the new stimulus package bill name

Aren't we currently loosing all our providers because government got involved? How many companies have pulled out of the Florida market since we started regulating what they could charge?

 

[Bob]

Aren't we currently loosing all our providers because government got involved? How many companies have pulled out of the Florida market since we started regulating what they could charge?

let me restate, government is involved because of collusion and profiteering

 

[Bob]

We think: State Farm's withdrawal from Florida isn't the end of the world -- OrlandoSentinel.com
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EDITORIAL
We think: State Farm's withdrawal from Florida isn't the end of the world
We think: State Farm's withdrawal from Florida isn't the end of the world

January 29, 2009

Let's bust some myths:

Myth No. 1: "With every policy comes the promise that we will be there when you need us." So says State Farm's Web site. But the State Farm subsidiary writing homeowners policies in Florida announced on Tuesday that it's leaving the state. That means 1.2 million loyal customers may have to find another insurer who will be there when they need them.

Myth No. 2: The property-insurance market in Florida is so grim that underwriters like State Farm can't afford to do business here. Interesting -- especially since the just-released report from the National Association of Insurance Commissioners indicates companies writing policies for residences in Florida together netted a 39 percent profit in 2007. And because Florida escaped hurricanes in 2008, they'll earn another windfall for that year.

Myth No. 3: Government regulations are killing the industry. Consumers and the industry would do better without them. But who, other than some insurance-company executives, thinks in the current economy that these businesses should be left to their own devices? AIG, Detroit's Big Three, and the excesses and unsound business practices that led to the bailouts of many of the nation's leading credit houses remain fresh in consumers' minds.

So, too, should this: Florida's legislators and regulators gave State Farm and other insurance companies exactly what they said they needed to lower or keep in check the rates they charge homeowners.

The state sold them discounted backup insurance that they need to pay claims after catastrophic storms. Insurers had cried that the high cost of that "reinsurance" had compelled them to drop policyholders and jack up rates.

And the state enticed residents to harden their homes against storms in exchange for getting discounts on their policies. Insurers said the better-built homes would allow them to lower what they pay out in claims, and that would help them keep rates under control.

But in the end that wasn't enough for State Farm. It requested a 47 percent average rate increase from regulators, which they and an administrative law judge found actuarially unsound and insupportable. Not getting its way, State Farm Florida announced it's leaving its namesake.

But not before it and the industry get a shot of reality.

Dose No. 1: Their good times at consumers' expense could end. Legislators vow they'll pass a bill requiring insurers to do what's expected of them -- underwrite risk rather than insulate themselves with sure things. For example, State Farm Florida may be leaving, but another State Farm subsidiary, State Farm Mutual Auto, expects to add to its $3 billion sales portfolio. Lawmakers would try to close the loophole that lets a company like State Farm Mutual Auto offer its lucrative line but no homeowner policies. It's worth exploring.

Dose No. 2: Despite Gov. Charlie Crist's offer to drive State Farm Florida to the border, State Farm may not get out so easily. Florida law says insurers can't withdraw from the state if doing so is "hazardous to policyholders or the public." The company and state lawyers might squabble over that language. But another law legislators hope to pass might settle any argument. It would allow an insurer to shed just 2 percent of its customers a year. Pass that bill this year and State Farm Florida won't disappear for years to come.

Dose No. 3: State Farm's departure wouldn't leave the state in ruins. More than 30 new companies began serving Florida in the past few years. They've written about a half-million policies, and they're expected to be able to take on a half-million more should State Farm exit the state. Other insurers also should enter the marketplace. State-run Citizens Property Insurance Corp. would take on tens of thousands of new customers, causing the state to assume more risk to homeowners. But the tumbling cost of reinsurance in the marketplace should allow the state to return some of its risk to the private sector.

State Farm's exit doesn't mean Florida's bought the farm.

 

[Bob]

http://www.orlandosentinel.com/news/columnists/orl-miket2909jan29,0,7711566.columnSorry, Charlie, State Farm needs to stay

Mike Thomas | COMMENTARY
January 29, 2009

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State Farm is bailing out of Florida, and Charlie Crist says good riddance.

I'm not sure the thousands of policyholders about to be thrown into the maw of Charlie's socialized insurance market will agree.

And the consequences extend well beyond that.

State Farm is about to dump 1.2 million policies, which means a massive expansion of the state-run Citizens Property Insurance. That will put taxpayers at even greater risk when the next big hurricane hits because Citizens is woefully underfunded.

Mike Thomas Mike Thomas Bio | E-mail | Recent columns
Related links

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TALK ABOUT IT: Does State Farm needs to stay?
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State Farm wants out of Florida home-insurance business
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We think: State Farm's withdrawal from Florida isn't the end of the world
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As State Farm and others leave, consumers will lose
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Consumer News

It also threatens the credit rating of not only the state but also the dozens of small private insurance companies that have set up shop in the past few years. Those insurers, many of them untested in a catastrophic event, depend on the state's ability to borrow money to help them pay their claims after a major storm.

That borrowing capacity is dwindling as the gap between the state's hurricane obligations and its ability to meet them grows.

A major rating agency for small insurers, Demotech, has notified them that they have until May 15 to demonstrate an ability to pay claims if the Florida Hurricane Catastrophe Fund goes bust, which would be a given after a major storm.

The fund is obligated to pay out $29 billion in claims but only has about $10 billion in the bank -- most of that borrowed money, by the way.

You need insurance to buy a house. A wholesale rating downgrade of Florida's insurance carriers could roil a real-estate market just showing signs of life.

This is serious stuff. And it could not be happening at a worse time.

Charlie Crist's foolish quest to suppress insurance rates is pushing Florida off a cliff.

This takes me back to State Farm.

It claims to be losing $20 million a month on property insurance. It says its Florida operation will be insolvent by 2011. The national headquarters had to bail it out with $750 million after the 2004-05 hurricanes.

Unlike Charlie Crist, State Farm can't discount rates by obligating taxpayers to pay billions in tax increases if we are hit by a major hurricane.

State Farm has to have the money in the bank.

So State Farm asked for a whopping 47 percent rate increase.

The amount was stunning.

I think State Farm looked at the Florida market long-term, looked at dealing with Crist for six more years and put an offer on the table it knew would be rejected so it could walk away.

There is no way the small insurers can pick up all those policies in the 2 1/2 years it will take State Farm to close out its property-insurance business. And so many of those policies will end up with Citizens Property. This only will increase the angst of credit-rating agencies.

Crist has Florida on a path toward junk-bond status.
t would have been better to simply give State Farm its rate increase.

As a State Farm customer, I would have liked the option of accepting the increase or going with a different insurer. I don't need Crist and company making that decision for me.

This also would have created a much more orderly retreat of State Farm from the Florida market.

Alas, it did not fit in the script Charlie has written for his moral crusade against the insurance industry.

Mike Thomas Mike Thomas Bio | E-mail | Recent columns
Related links

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TALK ABOUT IT: Does State Farm needs to stay?
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State Farm wants out of Florida home-insurance business
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We think: State Farm's withdrawal from Florida isn't the end of the world
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As State Farm and others leave, consumers will lose
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Consumer News

So now we could well face chaos in the market.

This is why some state officials are talking about limiting the number of policies State Farm can shed each year, dragging the process out. You can't order a company to continue losing money.

What message would that send to all those insurers the state is trying to lure into the market? Come to Florida, where we will regulate you into major losses and then prevent you from leaving.

Crist also talks about banning State Farm from selling auto insurance. I doubt that is legal. All it would do is decrease competition, increase costs and punish people who want to keep State Farm.

This week in Osceola County, Crist said property-insurance rates are "finally going down, something that hasn't happened in decades."

We are seeing the results of his triumph.

As for insurance rates going down, stay tuned.

They either are going back up -- way up in some cases -- or Florida is going to come crashing down.


Mike Thomas can be reached at mthomas@orlandosentinel.com or 407-420-55....yet another opinion

 

[Em]

Another Property Insurance Company Leaving Florida

Companies line up to take over State Farm policies

ORLANDO, Fla. ? Feb. 23, 2009 ? More Florida-based insurers are eagerly seeking property-insurance customers whose policies will eventually be dropped by State Farm Florida.

Northern Capital Insurance has announced that it can take as many as 50,000 State Farm policyholders.

State Farm announced in January that it would drop its Florida property-insurance customers ? more than a million ? over the next two years or so.

Northern Capital is among the companies that in the past have received approval to take policies from state-backed Citizens Property Insurance.

Other insurers that have said they want to pick up thousands of State Farm policies include Florida Peninsula, Security First, American Traditions, Modern USA, Edison, Olympus, Capitol Preferred and Southern Fidelity.

State Farm isn?t the only insurer getting out of property coverage.

Encompass Insurance said last week it will drop all its homeowners-insurance policies in Florida by 2011.

The company has started to notify its 13,000 homeowners policyholders by mail about the change, spokeswoman Jeralyn Thompson said.

?Market conditions make it really difficult for us to meet our long-term business objectives in the state,? said Thompson, who added that the company is not making a profit on its Florida property-insurance policies.

All Encompass customers will receive nonrenewal notices at least 180 days before their policies end.

Encompass will continue to maintain its Florida auto-insurance business, Thompson said.

Meanwhile, state insurance regulators had a public hearing Feb. 18 in Tallahassee to discuss how customers? credit histories are used by insurance companies to set prices for policies.

The Florida Office of Insurance Regulation had sent subpoenas to Allstate, Geico, Nationwide, Progressive and State Farm Florida, asking each company to send representatives to testify about how the companies use credit scoring, histories and models to underwrite and set rates for consumers.

Regulators also asked the companies to talk about actions they have taken to address concerns that the use of credit scores and credit models have a disproportionately negative effect on certain classes of people; efforts they have taken to reduce discrimination based on income or race; and the possible effect on the companies if the state prohibited the use of credit scoring or credit information.

Copyright ? 2009 The Orlando Sentinel, Fla., Anika Myers Palm. Distributed by McClatchy-Tribune Information Services.

 

[Lynnie]

OK - don't get me started. FL has no idea how to effectively manage their carriers, which I have proposed! Instead, they choose to allow carriers to treat the state like candy during good years and the plague if they've experienced any losses - ANYWHERE in The COUNTRY! It is insane what the powers that be in FL will allow!